Last weekend, in my Market Forecast, I said:
"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."
As expected, the Fed kept rates at near zero. However, the dollar went higher. Investors focused on the improving US economic and pushed the dollar higher, especially comparing to the Euros. Gold started to climb higher, but, fell after the FOMC meeting. Financials stayed weak, but, bounced slightly on Friday. The techs were stronger and the Nasdaq managed to close the week above 2200. On Monday, the XOM/XTO merger refocused some attention on the energy sector and the market labored higher. On Tuesday, the market was jittery, and we locked in our gains ahead of the FOMC meeting. On Wednesday, the Fed kept the rates unchanged. On Thursday, the market fell as the dollar rose. After the market, both RIMM and ORCL came through with strong earnings. On Friday, techs led the market higher.
We finished another light week of trading (gains above +50% are highlighted):
December 17, 2009
10:25 | HappyTrading ISRG ($290.90) Sold to Close AUAAJ Jan 300 calls, at $6.00 -35%
December 15, 2009
12:32 | HappyTrading FSLR ($139.30) Sold to Close QHBLG Dec 135 calls, at $6.60 +29%
12:00 | HappyTrading GOOG ($593.90) Sold to Close GOPLN Dec 570 calls, at $24.00 +229%
11:49 | HappyTrading CLF ($45.66) Sold to Close CGJAC Jan 42 calls, at $4.80 +17%
10:45 | HappyTrading CLF ($45.30) Sold to Close CGJAC Jan 42 calls, at $4.50 +10%
07:16 | HappyTrading FSLR ($142.00) Sold to Close QHBLG Dec 135 calls, at $9.00 +76%
07:13 | HappyTrading FSLR ($140.80) Sold to Close QHBLG Dec 135 calls, at $8.00 +57%
We cashed out on the final portion of the GOOG trade for a +229% gain and made a quick, 1-day trade on FSLR for a +76% return.
For the week, the Dow fell 142.61 points; SPX slid 3.94 points; Nasdaq gained +21.38 points. Gold, as mentioned earlier, traded lower. On the other hand, oil, as discussed in last weekend's Sector Watch, did make a bounce. At the time of this writing, the Asian markets were mixed, almost reminiscent of how last week started. Chinese and Hong Kong were down, while Japan and Taiwan were up. Gold and oil were steady. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX added +6.39 points to close at 1102.47, above the 1100 level. It closed right at its 20-day MA. Its MACd was slightly lower.
Nasdaq
Nasdaq gained +31.64 points to close at 2211.69. Its daily MAs were up. The MACD flattened.
SPX barely hung on to 1100, while Nasdaq broke above 2200. VIX kept below 22, once again. For the new week, we'll pay attention to the GDP and retail reports on Tuesday. Nasdaq looks really strong. Its daily upper BB has opened up. Normally, I'd say that Nasdaq is setting up for a breakout. But, with this "undecided" market environment, we'll have to wait until Nasdaq has caught up with the daily upper BB and is riding it higher to know for sure. SPX looks neutral and could go either way. The important thing seems to still be the dollar, as it affects how both oil and gold moves. Unlike in 2007 when gold first tested $1000, when gold traded against the market and was looked at as a safe haven; now, gold has been moving with the market and the dollar is being seen as the safe haven. Oil bounced last week, and with a merger, the energy sector saw some buyers come in. The financials were still in a slump, until Friday's little bounce. So, we'll keep our attention on the dollar/gold/oil triangle and the financials.
Sector Watch
GLD (gold)
GLD tested its 30-day MA last week, but, pulled back again. It is now in danger to fall lower. It'll need to rise and keep above the $110 level to avoid a bearish formation from establishing. There is a resistance at the $113 level.
USO (oil)
USO bounced last week, but, is still negotiaing with its daily MAs, which now act as resistances. I think USO could come up to test the 30-day MA on this bounce, which is at about $38.5 right now.
UUP (dollar)
UUP pushed higher on strong volume last week. It finally found some resistance between $23 and $23.2, which were established this summer in July and August. Its daily MAs are about to form a new bullish formation. It may be getting a bit toppy and may need a breather, but, the actions last week could have turned the 30-day MA into a support. We'll have to see how the dollar trade this week. It may need to come down to test the 10-day MA. UUP does look strong, so, we'll have to be very careful with the gold plays.
XLF (financials)
XLF lost more gounds last week and is now in a bearish phase. It tested support at $14 and bounced slightly. V and MA were very strong and broke out into new highs. We'll have to watch the $14 level very carefully this week. BLK broke higher and above $240 is a new breakout. PNC and STT should be strong if the sector is strong. But, the big banks (WFC, JPM, and GS) are still weak.
Good night and HappyTrading! ™
