Last weekend, in my Market Forecast, I wrote:
"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."
Indeed, Nasdaq broke out and "rode its daily upper BB higher" (see Nasdaq's chart). On Monday, the market jumped, although the dollar crept higher. Energy stocks stayed strong. On Tuesday, better home sales data kept the positive sentiment on the market. Coals and steels kept the buyers interested. On Wednesday, coals and steels continued to make new highs and internet stocks joined rally. We started locking in profits on a new batch of plays that we started in the beginning of the week. Thursday was a half-day. Stocks pushed higher on Christmas eve. We locked in more profits as GOOG made a new 52-week high.
For the week, the Dow was up +191.21 points; SPX added +24.31 points; Nasdaq gained +74 points. Even though gold bounced on Thursday and Friday, it was still lower for the week. Oil, however, made decent gains as inventories fell. At the time of this writing, Asian markets were up solidly. Oil and gold were slightly higher. Let's see how the market looks after Friday's close:
SPX
On Friday, SPX added +5.89 points to close at 1126.48. Its daily MAs and MACD were higher.
Nasdaq
Nasdaq gained +16.05 points to close at 2285.69. Its daily MAs and MACD continued higher.
Both SPX and Nasdaq broke out last week. SPX was finally able to close above 1120, and, Nasdaq was on a steep ride up after passing 2200! VIX sank to below 20. For the new week, the market still looks strong, but, may need a quick breather early in the week. If the market can keep its altitude while taking a breather, it could easily end higher by the end of the week. On the other hand, if the market pushes up on momentum early in the week, we may see some profit-taking before the year ends. Remember Friday is the 1st of 2010 and it's a market holiday. Energy stocks still look very strong. Financials started to go higher last week and could give the market the strength it needs to stay up. The dollar got a bit toppy last week and could slide back down, in which case, gold and gold miners should bounce.
Sector Watch
UUP (dollar)
Last week we said that UUP has resistance between $23 and $23.2. On Tuesday, UUP tested $23.2 again, but failed to break through. It slipped down to test that $23 level and held up above $23 for the week. If UUP goes below $22.8, it could go down to test the 30-day MA. I think we could see some more bounces from gold next week.
GLD (gold)
GLD finally made a bounce on Friday, but, was not able to overcome the loss made earlier in the week. It closed just below the 10-day MA. Its daily MAs just started a new bearish formation. That $112 to $113 level should see some solid resistance. If GLD gets above the 10-day MA, we could see a few days of bouncing from gold.
XLF (financials)
XLF finally cooked up a strong week last week. It is testing the 30-day MA. Notice that the MACD is showing a bullish crossover. If XLF gets above the 30-day MA, we could see it testing the $15 level in January. I will be watching the credit cards (MA and V) and the exchanges (ICE and CME). STT, PNC, and BLK also have some nice potentials to break higher. If GS pushes above $166, it should bode well for the financials as a group.
XLE (energy)
XLE is starting to look really good. Above the $58 level is a breakout! UPL, XLT, APA, HES, OXY, DVN all still look good. The oil services are also waking up. RIG, DO, SLB, NOV are still among the favorites.
Good night and HappyTrading! ™
