Last weekend, in my Market Forecast, I said:
"For the new week, although market indices still look strong, this rally is extended. Many tech and financial leaders could use a breather. On Tuesday, we have the FOMC meeting. The market may act undecidedly ahead of the meeting. If the market slips ahead of Fed's rate decisions but manages to keep close to SPX 1150, we could get another bump higher on Wednesday. There should be some support between SPX 1130 and 1140. Next week is options expiration for March, so, things will likely be choppy. If the market were to push higher, we'll need to see the commodity sectors rise, as financials and techs have gone quite far last week."
Indeed, the market "acted undecidedly ahead of the [FOMC] meeting." On Monday, the market opened lower, with financial and tech names getting a quick pullback; but, it was able to regained its footing in the afternoon. It managed to keep close to SPX 1150 ahead of the Fed announcement. On Tuesday, the Fed, without surprises, kept the interest rates at historical lows. Subsequently, the market rallied higher. On Wednesday, the commodity sectors pushed the market up to test SPX 1170. On Thursday, the market began to stall. We saw choppy trading on Friday, and as the expiration week for March drew to an end, the market experienced profit-taking.
We had some mixed results in this choppy week:
March 19, 2010
10:36 | HappyTrading STT ($46.50) Sold to Close 03C46 Mar 46 calls, at $0.50 -78%
March 17, 2010
11:59 | HappyTrading POT ($125.90) Sold to Close 04C120 Apr 120 calls, at $9.00 +64%
11:49 | HappyTrading GOLD ($76.70) Sold to Close 04C75 Apr 75 calls, at $4.10 +11%
11:44 | HappyTrading WYNN ($73.05) Sold to Close 04C75 Apr 75 calls, at $2.40 +12%
11:39 | HappyTrading GOOG ($566.80) Sold to Close 03C570 Mar 570 calls, at $2.10 -29%
March 15, 2010
12:19 | HappyTrading GS ($173.00) Sold to Close 03P175 Mar 175 calls, at $3.30 -23%
08:10 | HappyTrading WLT ($85.50) Sold to Close 03C85 Mar 85 calls, at $2.30 -36%
08:08 | HappyTrading MEE ($48.80) Sold to Close 03C50 Mar 50 calls, at $0.65 -55%
07:47 | HappyTrading BUCY ($63.20) Sold to Close 03C65 Mar 65 calls, at $0.65 -77%
07:44 | HappyTrading GOOG ($562.50) Sold to Close 04C600 Apr 600 calls, at $6.00 +71%
06:57 | HappyTrading RSH ($22.10) Sold to Close 03C22.5 Mar 23 calls, at $0.30 -65%
For the week, the Dow gained +117.29 points; SPX added +9.91 points; and Nasdaq gained +6.75 points. Gold ended slightly up, while oil lost its gains at the end of the week. This evening, at the time of this writing, Asian markets were mostly down. Oil was trading lower and gold was slightly off. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX lost 5.93 points to close at 1159.9. Its daily MAs glided up while the MACD flattened.
Nasdaq
Nasdaq fell 16.87 points to close at 2374.41. It tested its 10-day MA. The MACD stayed flat.
SPX charged higher last week to test 1170, while Nasdaq tested 2400. We saw profit-taking on Friday and VIX bounced slightly. Tonight, Congress approved the historic legislation extending health care to tens of millions of uninsured Americans, and cracking down on insurance company abuses. For the new week, the passage of the historic health bill may inspire more profit-taking, as now, there are more uncertainties. Besides what affect the new health legislation will have on the health care and insurance industry, some analysts are also paying more attention to the on-going discussions on financial regulations. We could see the market pullback to test SPX 1150 early in the week. If SPX 1150 does not hold, there's support between 1130 and 1140. If SPX snaps back above SPX 1150 after a quick pullback, we could see the market higher by the week's end. On the other hand, if the market breaks below SPX 1130, it could be looking at a bigger fall. Financials have rallied far, so, if the market pulls back, the financials have a lot of profits to be taken. Commodity sectors were on the defensive at the end of last week and could pick up downward momentum in a weak market.
Sector Watch
UUP (dollar)
UUP traded lower after the FOMC meeting. It pushed on its daily lower BB. But, before a new "bearish" formation could be established, it popped back up on Thursday, as investors turned to worry about the Greek credit crisis again. UUP closed above its daily MAs and above its daily upper BB. It is back in a neutral position, within its recent trading range. We'll watch the dollar closely as it still has a lot of pull on the commodity sectors, and thus, on the market.
GLD (gold)
GLD took nosedive on Friday after testing the resistance at $110 for most of the week. It came all the way back down to the support at $108 and was able to close above it. If GLD manages to stay above $108, it is still range-bound. If it breaks below $108, $104 could be tested.
USO (oil)
USO tested $40 again last week and was not able to break this resistance. It is back at its 20-day MA. The bullish formation still holds. Oil experienced a wild swing last week and so did the energy sectors. OIH (oil services) and XLE (energy) were on their ways to breakout. But, a quick reversal on Thursday and Friday, brought both sectors to almost bearish territory. If these sectors fall, we could see more than a quick pullback in the broader market.
PBW (clean energy)
PBW is testing its 30-day MA. On Thursday, SPWRA reported disappointing earnings. Its shares took a 14% dive on Friday. This does not bode well for the sector. FSLR could fall back to $100 if $110 does not hold. Their Chinese counterparts are doing much better, but, YGE and TSL are showing some weakness. If FSLR and STP start to turn weak, this sector could fall much lower.
Good night and HappyTrading! ™
