This weekend is a triple holiday weekend! Happy Valentine's Day, Happy Chinese New Year, and Happy President's Day!
Hope you've had a wonderful weekend!
Last Sunday, in my Market Forecast, I wrote:
"For the new week, the market could stage a bounce and bounce off of SPX 1060. Whether or not the bounce is meaningful will depend on if SPX can bounce above its 10-day MA, and then, SPX 1120 (the next resistance). If SPX 1060 does not hold, we could see the market test SPX 1040 before bouncing. So, how the market opens on Monday will be very important. The dollar is very strong, but, perhaps needs a breather. Commodity sectors could see buyers rushing in if the dollar pulls back. Financials are on the verge of breaking lower, so, we'll have to monitor them carefully."
Indeed, the market did stage a bounce. The commodity sectors jumped as the dollar pulled back. It was not until Friday when the Chinese government announced a second lending tightening that they dollar recovered most losses. But, still, the dollar ended slightly lower. However, SPX was not able to close above its 10-day MA. Financials were still weak and closed flat. On Monday, the market opened strongly, but, faded in the afternoon. On Tuesday, Europe pledged help for Greece and commodities led the market higher. On Wednesday, the market stuttered and closed flat. On Thursday, China reported a softer CPI and the commodity sectors rallied higher. On Friday, as China tightened lending for the 2nd time in a month, the market opened lower; but, it was able to regain its footing before the close.
Again, we took easy on the trading this week and only closed a few trades:
12:30 | HappyTrading ICE ($100.00) Sold to Close IHH02C100 Feb 100 calls, at $1.80 +13%
11:24 | HappyTrading ICE ($100.25) Sold to Close IHH02C100 Feb 100 calls, at $2.00 +25%
08:46 | HappyTrading GLD ($106.70) Sold to Close 03C108 Mar 108 calls, at $2.35 +7%
For the week, the Dow added +86.91 points; SPX added +9.32 points; Nasdaq gained +42.41 points. Both oil and gold went higher. China, Hong Kong, and Taiwan markets are all closed this week for Chinese New Year. At the time of this writing, Nikkei was higher. Gold was breaking above $1100. Oil was flat. Let's see how the US market looks after Friday's close:
SPX
SPX slid 2.96 points to close at 1075.51. It closed right at its 10-day MA. Its MACD glided up.
Nasdaq
Nasdaq added +6.12 points to lcose at 2183.31. Its 10-day MA and MACD went higher.
Technology stocks were much stronger than the broader market. Nasdaq closed above the recent support level of 2150 and also closed above its 10-day MA. SPX, however, had a much harder time. It still was not able to close above the 1080 level and closed right at its 10-day MA. VIX came down to close below 23. For the new week, if SPX can push above 1080, the market could rally higher to test 1100. Above 1100, 1120 is the next resistance. Tech stocks should continue higher if the market environment is strong. Gold is ready to push higher. We'll also be watching to see if the dollar can get a more meaningful pullback, as the market will need strength in the commodity sectors to continue the bounce.
Sector Watch
GLD (gold)
GLD bounced off of the support at $104 and closed above $107. The dollar was on its way down before China announced a 2nd lending tightening. Although the dollar is still strong, I still think it could see a more meaningful pullback. If GLD closes above its 30-day MA, it could turn bullish. Gold prices should at least test the $1100 level.
USO (oil)
USO tried bouncing higher, but was not able to close above its 10-day MA. This weekend, Saudi Arabia announced making preparation for the oil industry to peak this decade. It further added that it is working to become the top exporter of energy, including alternative forms such as solar power. This may exert further pressure on the oil and oil-related sectors. USO has a support at $35. Below $35, it could easily fall to $30.
SOXX (semiconductors)
SOXX closed above its 20-day MA last week. Its 10-day MA has curved up. The MACD also shows a new bullish turnover. Since financials and oil-related stocks may be weak. Semiconductors will have to become the leaders if the market were to rally higher. BRCM has bounced strongly after its earnings. MRVL and ALTR also look strong.
MOO (agriculture)
MOO closed above its 10-day MA, but, closed just under the 20-day MA. Its 10-day MA and MACD turned higher. This weekend, TRA agreed to be bought by Yara, a Norwegian fertilizer company, for $4.1 billion, which would give TRA's stock a value of $41.1, higher than CF's bid of about $36. CF itself is a takeover target with a bid from AGU. POT had increased its stake in Israel Chemicals just last week. It looks like there could be more mergers in this sector this year. With Saudi Arabia raising a tentative flat on oil, agriculture stocks may receive added value as alternative energy plays for ethanol. I think this sector could get a lot stronger.
Good night and HappyTrading! ™
