Last weekend, in my Market Forecast, I said,
"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."
Indeed, the market traded sideways, and the stronger sectors were the financials and the biotechs. The market started the week trading flat. On Tuesday, the unexpected drop in consumer confidence shook the market, which put the market on a more defensive mode. On Wednesday, the market managed a modest bounce. On Thursday, the market was hit by worse-than-expected economic news once again; this time, the jobless claims. The market was weak at the open, but, spent the rest of the day climbing higher. On Friday, the market was flat once again, although staying in the green. The weaker economic news did not give the market a chance to test SPX 1120. It did, however, managed to stay above SPX 1100, and thus, keeping the market in a tight range.
For the week, the Dow was down 77.09 points; SPX slid 4.68 points; Nasdaq slipped 5.61 points. Oil made some gains and gold was basically flat. The dollar pulled back a little. On Sunday evening, at the time of this writing, Asian market were mostly higher. Oil was slightly higher and gold was flat. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX added +1.55 points to close at 1104.49. It closed above the 1100 level. The 10-day MA rose above the 30-day MA. Its MACD went higher.
Nasdaq
Nasdaq gained +4.04 points to close at 2238.26. It closed above its daily MAs. The MACD continued to rise.
Both SPX and Nasdaq are showing similar pictures. They both closed above their respective daily MAs; their 10-day MAs have risen above the 30-day MAs; and, their 20-day MAs have turned up. VIX dropped back down to below 20. For the new week, the market certainly has room to rise. But, it'll have to break above SPX 1120 to go higher. The market is very "emotional" right now, and, the weekly jobless claims reports seem to keep the market on its toes. (What they really should do is to change the jobless claims reports to at least bi-weekly. A bi-weekly average may actually be more accurate and get rid of some "noises" in the numbers. Further, it may help to calm the nerves of the financials markets.) The dollar has risen quite far since its recent low in early December. It is starting to waver at a 7-month high. If the dollar pulls back, commodity sectors should bounce a bit more. Both oil and gold seem to be ready to go higher. We may see a strong opening for the week; but, if SPX 1120 cannot be broken, we are still range-bound. Techs look stronger than the broader market and should do well in a bullish environment.
Sector Watch
UUP (dollar)
UUP pushed above $23.8 last week, but, came back to close below its 10-day MA. $23.6 has been acting as a support. If UUP breaks below $23.6, it could come back down to test $23.2. Notice that the MACD is showing a new bearish crossover.
GLD (gold)
GLD was down initially, but, came back to close flat for the week. It daily chart is becoming a little more bullish. If it breaks above $110 again, I think it'll go higher to test $112. If it does go up to test $112, it'll probably have caught the rising daily upper BB; and, its daily MAs would have likely formed a new bullish phase. So, this $110 level is going to be very important in this coming week.
XLF (financials)
XLF got stronger last week. Besides the drop on Tuesday on the weak consumer report, XLF showed a lot of strength. The $15 level is the next resistance. Breaking above $15 would be quite a feat. This weekend, reports came out that AIG has agreed to sell its Asian life insurance unit to British Prudential PLC for $35 billion. Although a chunk of this $35 billion will likely go to the Fed to pay down its debt, AIG's market cap stands at a mere $3.3 billion as of Friday's close. We'll have to see how the financial sector responds if the AIG/Prudential PLC deal is confirmed on Monday.
BTK (biotechs)
We've been focusing on the biotechs for weeks now. BTK continued to push higher last week. GENZ has broken out and can easily go higher. CELG, AMGN, and OSIP are brewing their breakout setups. TEVA is another one to keep an eye on. SLXP has already gotten good news, but, the initial jump was not a big one; it could break out this week. NUVA received some very good news on Friday as both AET and UNH have approved coverage for its spinal therapy. We could see NUVA test the $44 level. UNH itself is about to break out.
Good night and HappyTrading! ™
