Happy MLK Day! Hope you've had a nice long weekend!
Last weekend, in my Market Forecast, I wrote:
"For the new week, the market still looks strong, but, will have to be supported by good earnings. Breaking and staying above SPX 1150 could be a psychological blow to the shorts. Steel stocks may have run a bit too far and may need a breather. On Monday, AA will report earnings after the market close, which will likely be a mover for the miners. Gold seemed to be ready for another test of the $1200 level, but, could take more than a week to get there. Financials have come quite far; some sideways trading in the beginning of the week could set up nicely for JPM's earnings on Friday morning. Since the financials and miners led the market up last week, it may be techs' turn to be in the front. We'll be watching INTC's earnings on Thursday after the market."
Once again, things happened as forecasted. Steel stocks, along with other miners, did get a pullback. Most of the pullback in the miners came on Tuesday, after AA's earnings missed the estimates. Gold tried to push higher on Monday, but, got dragged back with rest of the metals-and-mining sector. However, gold ended the week basically flat. On Wednesday, the market demonstrated tremendous strength, led by techs, and shrugged off AA's disappointing earnings report to push higher. We profitted on BIDU's big moves and booked winning trades on both sides! By Thursday's close, the day before INTC's earnings report, the market recorded new highs since October 2008. SPX tested the 1150 level, but, was not able to close above. Once again, we took solid gains by trading on both sides, taking advantage of the volatility during an options expiration week. INTC did give a blowout earnings report. However, on Friday morning, JPM spooked the market with its increased loan losses. The market turned back and ended the week lower.
Besides the quick winning trades that we did in the Trading Room, our published were good as well. Here were the closed trades for last week:
January 15, 2010
07:39 | HappyTrading FFIV ($51.50) Sold to Close FLKBJ Feb 50 calls, at $3.60 -12%
January 13, 2010
07:51 | HappyTrading PCLN ($210.50) Sold to Close PNENB Feb 210 puts, at $12.40 +9%
07:50 | HappyTrading POT ($116.70) Sold to Close PYPMD Jan 120 puts, at $4.00 +8%
January 12, 2010
10:00 | HappyTrading FAS ($80.70) Sold to Close FPMME Jan 83 puts, at $3.60 +31%
09:32 | HappyTrading FAS ($80.90) Sold to Close FPMME Jan 83 pust, at $3.55 +29%
January 11, 2010
11:58 | HappyTrading ASEI ($82.65) Sold to Close KBUAP Jan 3 calls, at $3.10 +41%
Because the market was volatile and was swayed by the earnings reports, we stayed nimble and profitted on both sides (both calls and puts).
For the week, the Dow was only down 8.54 points; SPX lost 8.45 points; Nasdaq fell 29.18 points. Oil traded lower for 5 straight days; and, as mentioned before gold was only slightly lower. This evening, at the time of this writing, Asian markets were mostly lower. Oil was steady and gold was slightly higher. Let's see how the US market looks after last Friday's close:
SPX
On Friday, SPX lost 12.43 points to close at 1136.03. It closed below its 10-day MA. The MACD slid.
Nasdaq
Nasdaq dropped 28.75 points to close at 2287.99. It closed just above its 20-day MA. Its MACD went lower.
Both SPX and Nasdaq closed below their respective 10-day MAs. Their MACDs have turned lower. However, VIX is still below 18. For the new week, the market will start on some shaky grounds. Once again, it's mostly about the earnings! On Tuesday, before the market opens, C reports, and after the market, we'll hear from IBM. These could set the tone for the broader market until Thursday, when GS reports in the morning, while AXP and GOOG deliver in the afternoon. UNP also reports on Thursday morning and good give some more clues on the economy; its competitor CSX will have reported after the market on Tuesday. On Friday morning, GE will present its report card. So, it's going to be a busy week with numbers from some key bellweather companies. On the top, we'll still be eyeing that SPX 1150 level. But, if SPX falls below 1120, the market could turn bearish.
Sector Watch
XLF (financials)
XLF closed just below the $15 level last week. Right out of the gate this week, we'll have to see how the market reacts to C's earnings. On Thursday morning, GS will report. If XLF breaks above $15.4, it should see a new breakout. MA pushed to a new 52-wk high on Friday. It should be an interesting play with AXP's earnings on Thursday.
UUP (dollar)
UUP closed below its daily MAs last week. A push below the $22.6 market could turn it bearish. It is a tough balancing act that the global governments are doing. On one hand, they need to keep the dollar up to give people confidence in the US economy. On the other hand, they need to make sure that the commodity-related stocks can keep drawing investors in.
GLD (gold)
GLD tried breaking out on Monday last week, but, got pulled back on AA's earnings report. Its 10-day MA has crossed above the 30-day MA, but, the 30-day MA is still pointing down. Some mixed signals. GLD will need to break the resistance at $112 first to start turning the daily MAs higher. Above $114 should set it up for a break out. But, if it drifts lower from here, it will likely test $106 again.
XME (metals and mining)
XME pulled back quite a bit after reaching above $60 last Monday. This week will be the test for this sector. There's support between $52 and $54. We'll have to see how well this sector holds up after AA's earnings. Without metals and mining, commodity sectors will be weak. Without the commodity sectors, the broader market will find it hard to push higher.
Besides the earnings, we'll keep an eye on the potentail merger activities in the fertilizers. CF and AGU dance is getting hotter. On Friday, Vale said it will pay $3.8 billion for BG's assets in Brazil. This should keep investors attention on the fertilizers.
Good night and HappyTrading! ™
