Last weekend, in my Market Forecast, I wrote:
"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."
Indeed, things happened exactly as forecasted. Monday was a market holiday. On Tuesday, the dollar pulled back and the commodity sectors rallied. The market pushed above SPX 1080 early in the morning and pushed higher all day! Gold also jumped! On Wednesday, the market stuttered to test SPX 1100. On Thursday, the market closed above SPX 1100, led by the techs. On Thursday night, the Fed decided to raise the discount rate, or the bank loan rate. Overnight, the dollar jumped. But, as Friday's market opened, the dollar fell back and once again. Although the market opened lower, the commodity sectors soon rallied. SPX 1100 acted as a strong supported level. By noon, the market had rallied back into the green and held on to a small gain to close.
Every weekend, in my Market Forecast/Sector Watch article, I try to sum up what most likely will happen in the coming week. This is to help prepare our members to pay attention to possible trades, and, to take a peek ahead before the new week starts. If you are following my published trades, it is definitely to your advantage to read this Market Forecast before Monday. If you are a new member, and are wondering where to start, reading my Market Forecast every weekend would be a good place (that is, if you are not ready to get your hands in trading action yet).
We had a pretty good week, 100% GR$$N on our closed trades (trades with gains above +50% are highlighted):
February 19, 2010
11:50 | HappyTrading CSTR ($29.64) Sold to Close 03C25 Mar 25 calls, at $4.70 +12%
February 18, 2010
11:05 | HappyTrading CLF ($51.25) Sold to Close 02C49 Feb 49 calls, at $2.30 +84%
10:51 | HappyTrading CLF ($51.10) Sold to Close 02C49 Feb 49 calls, at $2.20 +76%
08:13 | HappyTrading CLF ($50.90) Sold to Close 02C49 Feb 49 calls, at $2.05 +64%
February 16, 2010
07:04 | HappyTrading TSL ($25.65) Sold to Close 02C24 Feb 24 calls, at $1.80 +100%
06:42 | HappyTrading GLD ($109.25) Sold to Close 03C108 Feb 108 calls, at $3.60 +64%
We do, however, have 2 trades left over from January that expired. These will be reported in the monthly wrap for February, since they were February options.
For the week, the Dow was up +303.21 points; SPX added +33.66 points; Nasdaq gained +60.34 points. Oil jumped all the way back to above $79/barrel. Gold touched $1120/ounce and held above $1115/ounce. This evening, at the time of this writing, Asian markets were mostly higher. Both oil and gold also went up. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX added +2.42 points to close at 1109.17. It closed above its daily MAs and above the 1100 level. The MACD went higher.
Nasdaq
Nasdaq gained +2.16 points to close at 2243.87. Its 10-day MA curved above the 20-day MA. The MACD continued up.
The market had a strong week, with both SPX and Nasdaq closing above their respective daily MAs. We are also seeing the 10-day MAs curving higher. VIX sank back to 20. For the new week, as mentioned last weekend, SPX 1120 will be the nearest resistance. The market has rallied quite far. Unless, there are really positive news to help push the market higher, SPX 1130 could be a tough resistance beyond the 1120. So, if SPX 1130 cannot be broken, we might see the market trading sideways for a few days. In the past couple of weeks, we have seen the commodity sectors lead the market higher. The tech stocks will be strong if the market is strong; but, so far, they have not been leading the "attack". If the financials can regain strength and become the leading sector, the market could push above SPX 1130. Another sector to watch is the biotechs.
Sector Watch
UUP (dollar)
Even with the pullback last Tuesday, the pop on Thursday night was so strong, UUP actually closed higher last week! UUP still looks bullish. It will keep the bullish trend as long as it stays above $23.6.
GLD (gold)
GLD closed above its daily MAs last week. Its 10-day MA has turned higher. The daily upper BB has opened up. GLD can break out from here to test the $112 to $114 area. ABX is the strongest gold mining stock right now, as it plans to spin off its business in Africa as a separate trading stock.
USO (oil)
USO went from a potential break down just 2 weeks ago to now a small breakout. It has caught up with its daily upper BB. The 10-day MA has crossed above its 20-day MA. $39.5 presents a soft resistance; $40 would be the real challenge.
BTK (biotech)
BTK rallied back above 1000 and is on a new leg up. Its daily MAs are exhibiting a newly-established bullish formation. CELG, AMGN, GENZ, GILD could be ready for their next leg up. TEVA bounced higher on Friday and is looking strong. Above $59, TEVA will break out.
The market has rallied higher on the backs of commodity stocks. If the market were to push higher, we'll need to see new leaders. Financials will need to be stronger. Semiconductors have led the techs. The high-flying "4 horsemen", on the other hand, have been muted. So, we might see some buying actions in RIMM, GOOG, AMZN, and AAPL to keep the market going.
Good night and HappyTrading! ™
