Last weekend, in my Market Forecast, I said,
"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."
Indeed, the upwards momentum pushed the market up on Monday, and, we saw profit-taking by the week's end. The financials were stronger, especially GS, which was discussed in last weekend's Sector Watch. They helped to keep the market stay up until the last trading hour of the year, where we saw some quick pullbacks.
The market ended the week, and the year, on a quick profit-taking. For the week, the Dow was down 92.05 points, losing more than 70 points in the last hour! SPX fell 11.38 points; and, Nasdaq lost 16.54 points. Dollar actually went slightly higher, while gold fell lower. Oil, on the other hand, gain some solid grounds. This evening, at the time of this writing, Asian markets were mixed, but, stayed strong, with the Taiwanese Index still pushing higher while the Hang Seng (Hong Kong) was slightly negative. Let's see how the US market looks after its 2009 close:
SPX
On 12/31/09, SPX lost 11.32 points to close at 1116.1. it closed just below its 10-day MA. The MACD turned down.
Nasdaq
Nasdaq dropped 22.13 points to close at 2269.15. It stayed above the 10-day MA, but its MACD went lower.
The quick pullback last Thursday was enough to turned the MACD on the market indices lower. VIX quickly jumped to close above 21. Last Thursday, before the quick pullback, I commented in the Trading Room:
December 31, 2009 11:47 AM
...hard to say where the market is going to open on Monday, but, SPX hourly chart is weak. VIX looks like could get a hop.
As if on cue, VIX popped less than 15 minutes after my comment! For the new week, we are seeing mixed signals on the market again, which means the market needs more time to consolidate. With the MACD turning lower, we could see another couple of days of profit-taking in various sectors. It will be important for SPX to hold above 1110. However, oil looks strong and could breakout. We'll have to see how this will affect the energy stocks. Financials almost turned bullish last week, until the quick pullback in the last hour, which kept XLF below the resistance. We'll get the latest unemployment report on Friday, but, I think the market could make up its mind about where to go next before the new jobs data come out.
Sector Watch
USO (oil)
Last week, USO jumped on Monday and kept gliding up throughout the week. It broke through the resistance at $38, which was the 30-day MA. Now, it could challenge the $40 level which would push the daily upper BB open and allow it to break out! The 10-day MA has already crossed above the 20-day MA. If USO catches its daily upper BB, the 20-day MA should turn up as well. If the $40 gets broken, I think USO will turn bullish and be on its way to $45.
OIH (oil services)
On the other hand, OIH traded lower last week; and, its 30-day MA is still on a down slope. We are not seeing the energy stocks trading with the crude oil. OIH will need to stay above $118 to avoid turning bearish. We'll watch names such as SLB, RIG, DO, and NOV carefully.
GLD (gold)
GLD finished last week right at its 10-day MA. Its daily MAs are now showing a bearish formation. However, its MACD has flattened. If GLD breaks below $106, it should start a new leg down. Gold is fighting to stay above the $1100/ounce level right now. Above $112, GLD can turn bullish and we should see a bullsih crossover in the MACD as well. UUP (not shown here) is fighting a tough resistance at around $23, but, it's still looking strong. I'm watching GLD with great interest because I think if GLD does not turn up soon, the gold plays could be range-bound for another few weeks!
XLF (financials)
XLF fought a good fight last week, but, still couldn't quite close above its 30-day MA. But, it managed to stay above the 10-day MA. The daily BBs are closing in fast, so, bigger movements should be coming soon. The MACD is keeping a bullish stance and will need XLF to break above the 30-day MA to continue rising. Catching the daily upper BB could be a turning point. GS showed impressive strength last week, but, that could have been because it has been so weak for 3 weeks. Other big banks such as WFC, JPM, and BAC didn't really participate. On the other hand, V, MA, ICE, and CME climbed higher, as discussed. I think the XLF could tell the true story next week. Breaking above $14.6 will be the key for the continuation of the market's rally. ICE and CME could break out higher, so, keep them on your active list.
Good night and HappyTrading! ™
