Last weekend, in my Market Forecast, I wrote:
"For the new week, the help that eurozone governments have committed to Greece should inspire the market to a strong start. We could easily see SPX 1200 tested. Nasdaq can rise to test 2480. We'll also see the beginning of the earnings season, with AA reporting after the close on Monday. Tuesday after market, we'll hear from INTC. JPM delivers on Wednesday morning. Thursday afternoon, GOOG will announce its quarterly results. Finally, on Friday morning, BAC shows its report card."
Once again, things unfolded as forecasted. The market got off to a good start on Monday, cheering the news on Greence. On Tuesday, the market kept its bullish stance, awaiting earnings from INTC and JPM. After the market, INTC reported a "blowout" quarter! On Wednesday, JPM delivered strong earnings and the market was off to the races! Nasdaq opened above 2480 and closed above 2500. SPX went above 2010. On Thursday, the market was slightly higher, but, saw profit-taking in after-hours trading even though earnings were good. As discussed in my article that evening, the market looked ready for a pullback. On Friday, the market started out weak. At about 10:30 AM ET, SEC charged Goldman Sachs with fraud, and, the selling momentum picked up. We had a pretty good week with some "fast-money" trading in the Trading Room.
For the week, the market still made gains. The Dow still closed above 11,000, up +81.71 points; SPX added +14.03 points; Nasdaq gained +27.21 points. Both gold and oil lost grounds. This evening, Asian markets were mostly down, digesting the news on fraud charges agains Goldman Sachs. Here's how the US market looks after Friday's close:
SPX
On Friday, SPX fell 19.54 points to close at 1192.13, just above the 1190 level. Its MACD went down.
Nasdaq
Nasdaq lost 34.43 points to close at 2481.26, above the 2480 level, but, could not hold 2500. Its MACD also dropped.
Nasdaq came close to its 10-day MA and bounced back while SPX closed under. VIX jumped as high as 19.7 on Friday before closing above 18. For the new week, things get a bit tricky. While earnings are still expected to be strong, the anxiety over possible financial reforms can cast a shadow on the market, especially over the financial sector. Here are some key earnings reports in the new week:
Monday: IBM (after market)
Tuesday: GS (before market), AAPL (after market)
Wednesday: before market: EMC, FCX, BA, MCD; after market: QCOM, AMGN, EBAY, FFIV, SNDK, MEE
Thursday: before market: BTU, SHW; after market: AMZN, MSFT
Friday: before market: MDC, PCX, SLB
I think we'll see some follow-through weakness on Monday. In general, I'd expect stronger earnings from the tech stocks. Depending on how the developments on Goldman's case (perhaps others?) and the financial reform issues go, the concerns in the financials may overshadow earnings. If the 10-day MAs can hold up on Monday and Tuesday, I think we'll see buyers come back in on Wednesday, especially if AAPL reports good earnings. However, if more unfavorable news come out in the financial sector, "sell on news" may happen even on good earnings. After all, a lot of stocks have run up fast in the last month. We were expecting a quick pullback, which happened on Friday. But, the pullback was not completely technical this time, so, it could turn into a correction. If the market breaks below SPX 1180, this 2-month rally will likely see a momentum shift to the downside.
Sector Watch
GLD (gold)
GLD had problems breaking above the resistance around the $113-$114 area. It closed below $112. At best, GLD should be range-bound this week. If it falls below $110, it could turn bearish.
XME (metals and mining)
XME has been testing the resistance at $60 for 2 weeks now, and has not been able to break through. It closed at its 30-day MA last week, finding some support. In a weak market environment, this sector will likely not hold. We'll see how FCX, BTU, MEE, and PCX report this week.
XLF (financials)
XLF is perhaps the most important ETF to watch this week. It tested 20-day MA on Friday and bounced above. Its MACD is starting to form a bearish crossover. If the support at $16 breaks down, this sector should turn bearish. In which case, I think a market correction will start to pick up speed.
INX2 (internet)
Internet sector was hit hard on Friday, as GOOG dropped 7.59%. It is resting on its 30-day MA. Its MACD looks to be starting a new leg down. If the 30-day MA breaks down, INX2 can sink to 270 before finding support. EBAY is already looking weak ahead of earnings. AMZN still looks strong, but, it did just set a new all-time high on Friday. So, sell-on-news can still happen in a weak market.
I'm going to be very careful this week. Perhaps it'll be easier to trade with the market direction than to trade earnings, especially if the market comes down on unfavorable news in the financial sector.
Good night and HappyTrading! ™ 
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