Last weekend, in my Market Forecast, I said:
"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... 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."
Indeed, the earnings reports were mostly on the strong side, especially for the techs. We did not get much new developments on Goldman's case and even the financials had a fairly good week. On Monday, we did see some "follow-through weakness". But, it only lasted through the morning. In the afternoon, the market staged a dramatic turn-around and closed in the green! On Tuesday, the market glided higher, expecting good news from AAPL. After the market, AAPL delivered blowout earnings for its 1Q. Both Nasdaq and SPX stayed above their respective 10-day MAs. On Wednesday, the market opened higher, but, lost most of its gains before the close. In the after-hours trading, reactions to AMZN and MSFT earnings were not so favorable. On Thursday, the market sank lower at the open, but came back in the afternoon with another huge, positive, reversal in the afternoon. On Friday, the market stayed strong; both SPX and Nasdaq closed at new highs for 2010.
I was on the "cautious" side and did not make many trades. Here are the closed trades from last week:
07:14 | HappyTrading AIG ($44.80) Sold to Close 05C40 May 40 calls, at $5.90 +64%
12:29 | HappyTrading AIG ($43.20) Sold to Close 05C40 May 40 calls, at $4.70 +31%
08:38 | HappyTrading STEC ($14.50) Sold to Close 05C14 May 14 calls, at $1.48 +10%
For the week, the Dow was up +126.44 points; SPX added +25.15 points; Nasdaq gained +48.89 points. One very important thing to note is that Nasdaq is back above the "pre-Lehman" (Sept. 2008) levels!!! Both gold and oil experienced a late surge on Friday and ended the week higher. At the moment of this writing, Asian market were mostly higher this evening, with the Nikkei 225 (Japanese Market) up more than +2%! Both oil and gold are trading higher as well. Here's how the US market looks after Friday's close:
SPX
SPX added +8.61 points to close at 1217.28. Its daily MAs and MACD went higher.
Nasdaq
Nasdaq gained +11.08 points to close at 2530.15. Its daily MAs and MACD also went up.
Both SPX and Nasdaq are at new highs. VIX is still in the 16s. For the new week, it certainly looks like the upwards momentum is still with the market. Nevertheless, the market is getting toppier every week. Besides more earnings to come, we also have a FOMC meeting on Wednesday and GDP report on Friday. Most analysts agree that the Fed will keep interest rates at historic lows, and the GDP report is expected to be strong. It seems that the only potential force that can go against the market is the on-going discussion on the financial reform. Techs have risen a lot. It looks like buyers may shift thier attention to the commodity sectors this week. The late buying last week on energy and mining stocks have quickly turn these sectors back up. Techs have emerged as the new leaders in this bull run; so, they should be fine as long as the market stays bullish. To continue going higher, the market will likely have to rely on energy and mining stocks. However, if any unfavorable news come out of the financial sector, this market can still get a quick pullback. As discussed last week, the 10-day MAs will be the first supports.
Sector Watch
UUP (dollar)
With the FOMC meeting coming on Wednesday, UUP is already being clamped in by the daily BBs. Its 20-day MA is starting to turn down. The once resistance level $23.6 is now a support. However, if UUP does come down to test $23.6, we might be seeing a new bearish formation in its daily chart. In which case, we could see $23.4 to $23.2 tested.
GLD (gold)
GLD jumped on Friday, close above the $113 level. Its MACD is turning up. If GLD catches its daily upper BB with some momentum, we'd like see a breakout. Besides GLD, GOLD also has a lot of momentum. ABX, AEM, NEM, RGLD, and PAAS (silver) are other good plays in the sector.
XLE (energy)
XLE's jump on Friday was very impressive, and closing above the $61 level is very significant! Its next resistance is at $65. We'll have to see how the overall market does. It may need to come down to test the $61 level first before pushing higher. APA, OXY, HES, UPL, DVN are among the favorites in this sector. In addition, the oil services stocks are also very strong with BHI, SLB and NOV breaking out on Friday.
XME (metals and mining)
XME also had a dramatic turn-around on Thursday and Friday. It managed to close above its daily MAs. Above $60 is a breakout. Both CLF and WLT are reporting earnings on Wednesday after market. ACI, PCX, ANR, and BTU are also looking strong.
Good night and HappyTrading! ™ 
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