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Weekly Wrap + Market Forecast + Sector Watch: SPX, Nasdaq, XLF, GLD, XME, SOXX, GS, WLT, CLF, BTU, ACI, PCX, BRCM     

Last weekend, in my Market Forecast, I wrote:

"For the new week, the market is in a very vulnerable position.  The bounce last week took to the market to test the 10-day MA.  But, with a quick reversal, it closed under the 10-day MA again.  Further, both SPX and Nasdaq are showing newly developed bearish formations in their respective daily MAs.  The problems in Europe seem to continue to unfold and are pressuring the global financial markets.  SPX 1120 could provide some initial support, but, below SPX 1120, the market could test SPX 1080...
...
The market could re-test the February lows.  The difference is that this time VIX could rise much higher
."

Once again, things happened as how they were forecasted.  The market fought with the SPX 1120 level from Monday to Wednesday.  On Monday, the market was weak in the morning and test SPX 1120, but, bounced back in the afternoon.  On Tuesday, the market fell again, but, managed to close just above the 1120 level.  Wednesday was another volatile day, but, the market closed just below 1120.  On Thursday, the big "swoosh" down finally happened and the market closed below the SPX 1080 level.  On Friday, the market went down briefly below the 1060 level to test the February low and a short-cover rally gave the market a boost, as discussed on Thursday.

We ended the week with 100% of the published trades in the green, in huge trades on SHLD puts with profits as high as +347%:

May 20, 2010
12:09 | HappyTrading EOG ($97.40) Sold to Close 05P100 May 100 calls, at $3.00 +11%
11:59 | HappyTrading DECK ($128.00) Sold to Close 05P130 May 130 put, at $3.00 +25%
10:50 | HappyTrading EOG ($97.60) Sold to Close 05P100 May 100 put, at $3.20 +19%
09:59 | HappyTrading NFLX ($93.30) Sold to Close 05P100 May 100 put, at $7.00 +43%

May 19, 2010
07:21 | HappyTrading SHLD ($98.80) Sold to Close 05P105 May 105 put, at $7.10 +347%
07:10 | HappyTrading SHLD ($99.70) Sold to Close 05P105 May 105 put, at $6.30 +296%

May 18, 2010
12:27 | HappyTrading SHLD ($102.30) Sold to Close 05P105 May 105 put, at $4.50 +183%
12:08 | HappyTrading MEE ($32.66) Sold to Close 05P35 May 35 put, at $2.70 +13%

For the week, the Dow was down 426.77 points; SPX fell 47.99 points; Nasdaq had a "triple-digit" loss, dropping 117.81 points!  Both oil and gold slumped as well.  Oil barely held up $70/barrel and gold went down to the $1180s/ounce.  At the time of this writing, Asian market are mostly higher.  Let's take a look at the US market after Friday's close:

SPX

On Friday, SPX added +161 points to close at 1087.69, above the 1080 level.  Its MACD went down.

Nasdaq

Nasdaq gained +25.03 points to close at 2229.04, above the 2200 level.  Its 10-day MA flattened and the MACD slipped.

VIX shot up above 48 on Friday, but, closed just above 40.  Both SPX and Nasdaq bounced back to close above their respective, critical supports.  For the new week...

To read the rest of this article, please subscribe to HappyTrading "Premium Articles" by going to the Premium Services (click here) page.  If you are already a subscriber, please click here: Market Forecast 5/23/10.

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  • at $6.00 by Ecstatic Plays
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