Last weekend, in my Market Forecast, I wrote:
"For the new week, the market will start with a more bullish stance. The daily MAs on both SPX and Nasdaq have turned higher. Nasdaq is already seeing the hint of a new bullish crossover in the MACD. VIX managed to close just above 21; but, breaking below 21 could send it to test 20 again. Semiconductors have been basically "dormant" since 2002 when energy stocks took over as the leaders on the market. We could be seeing the changing of the "leader baton" back to the techs, which will ride heavily on the semiconductors. We'll still need to see financials wake up from its recent slumber, though. If the market can close above SPX 1120 and Nasdaq 2200, it should start a new leg up."
Semiconductors were strong to start the week. But, the financials stayed flat. The market basically didn't go anywhere. Nasdaq tested the 2200 a couple of times, but, was not able to close above it. On Monday, solars and fertilizers pushed higher. On Tuesday, gold continued to slump and dragged commodity-related sectors lower. On Wednesday, commodity sectors bounced and the market was able to finish in the green. On Thursday and Friday, the market clawed back the grounds that it had lost on Tuesday and finished the week basically flat.
We took things easy last week and traded lightly as the market was treading water. Here were the closed trades:
December 11, 2009
08:43 | HappyTrading CLF ($43.30) Sold to Close CGJAC Jan 42 calls, at $3.40 +10%
08:26 | HappyTrading AAPL ($194.44) Sold to Close APVAT Jan 200 calls, at $5.30 +6%
07:47 | HappyTrading CLF ($43.80) Sold to Close CGJAC Jan 42 calls, at $3.70 +19%
December 09, 2009
01:00 | HappyTrading AAPL ($198.10) Sold to Close APVAT Jan 200 calls, at $7.50 +50%
12:19 | HappyTrading AAPL ($196.20) Sold to Close APVAT Jan 200 calls, at $6.60 +32%
06:55 | HappyTrading GS ($162.25) Sold to Close GPYXL Dec 160 puts, at $2.17 -10%
December 08, 2009
07:54 | HappyTrading SHLD ($70.90) Sold to Close KTQLN Dec 70 calls, at $2.30 -59%
We caught a quick trade on AAPL as it bounced. CLF was another quick trade. We cashed these out before the weekend as the dollar was strong. This weekend, S&P reported that it will add CLF into the SP 500 Index as of 12/18. So, we'll be keeping an eye on CLF!
For the week, the Dow added +82.6 points; SPX added +0.43 points; Nasdaq slid 4.04 points. Both oil and gold suffered substantial pullbacks. Gold traded below $1120/ounce (off $100/ounce from the recent high) and oil finished below $69/barrel! At the time of this writing, Asian markets were mixed with the Taiwanese market trying to break higher. Gold was having a slight bounce. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX added +4.06 points to close at 1106.41. It closed above its daily MAs. The MACD turned up.
Nasdaq
Nasdaq slid 0.55 points to close at 2109.31. Its daily MAs went higher although the MACD was flat.
Both SPX and Nasdaq managed to close above their respective daily MAs. Nasdaq is showing a new bullish formation in its daily MAs. VIX closed, once again, below 22. For the new week, we have the FOMC meeting on Wednesday. It'll be interesting to see how the dollar/gold trade goes ahead of the meeting. The Fed had already indicated that it will keep the interest rates low for a while. Since the dollar has bounced quite a bit in the past 2 weeks, it now has room to come back down again, which would send gold back up. If the recent market dynamics still holds, then, rising gold should be bullish for the market. Financials started bouncing a bit at the end of last week. We'll have to see if they could continue to push higher. SPX 1120 and Nasdaq 2200 are still the resistance levels to break.
Sector Watch
GLD (gold)
GLD came all the way down to close below its daily MAs. However, the uptrend is still unbroken and the daily MAs are holding their bullish formation, although the 10-day MA has turned lower. If GLD starts to bounce here, it'll be able to keep its bullish formation.
USO (oil)
USO took a big fall last week. The $35 level is now the nearest support. I think we should see oil prices to start bouncing a bit, although I don't expect anything drastic. The $40 level on USO will be the resistance to watch on any strong bounce. Below $40, USO is still range-bound. The energy sectors have been really weak and should see some strength if oil bounces.
XLF (financials)
XLF finished lower last week, although it is interesting to note that the 20-day MA has risen above the 30-day MA. V is going to be added to the S&P 500 Index on 12/18. We should pay attention to MA and AXP. COF has jumped quite a bit already and is getting a bit toppy on the intraday charts. But, a quick breather could set it up for a new breakout.
INX2 (internet)
INX2 has been really strong. It has once again established a new bullish formation. Breaking above 250.5 should give way to a new breakout. Accessing the Internet from smartphones seems to be the next big thing. This weekend, GOOG was reported to be planning to offer its own smartphone as early as beginning of next year. It feels like the next Internet Tsunami wave is already in development. AMZN has gone up so much, but it seems to be still hanging. It might still have some momentum left for the Christmas ride. PCLN has risen to a dizzying height, from below $50 at the lows of 2008 to now above $220!! Its charts are toppy, but, a quick visit to above $230 is not out of the question.
