First of all, happy Memorial Day!
Last weekend, in my Market Forecast, I said:
"For the new week, we'll have to see how much momentum the bounce on Friday has to carry through. SPX 1110, 1120, and its 10-day MA should provide resistances. The daily MAs of SPX and Nasdaq are well into their new bearish formation. If the market cannot rise above the 10-day MA, the bearish trend should continue to form. So, we'll have to see how strong this bounce will be. The financials will be among the most important sectors to watch. Now that the financial reform bill has been past, there is a little more clarity for the sector. Miners have been beaten down, so, if the market bounces, we should see buyers come into these stocks."
The market did indeed attempt to bounce. If we take out Tuesday mornings big gap down, the market actually had a nice upward bias. Financials dominated the broader market's movements, and, whenever the market moved higher, miners attracted buyers, as forecasted. It was a volatile week, to say the least. On Monday, the market struggled to continue to bounce from the Friday before. On Tuesday, the market slumped at the open to test February lows. However, buyers immediately came in a drove the market back up. Wednesday was much like Monday, struggling to keep the bounce going. Thursday saw the strongest day of the week as China expressed confidence in European debt. Techs rallied solidly, taking Nasdaq green for the year. But, the market lost momentum again on Friday.
It was a very unstable week. However, we wrapped up a nice month, trading on the downside!
For the week, the market ended little changed. The Dow was actually down 56.76 points; SPX added +1.72 points; Nasdaq gained +28 points. Both oil and gold bounced higher. Oil traded back above $74/barrel and gold was above $1200/ounce again. At the time of this writing, Asian markets were mixed. They opened lower, but, some seemed to be bouncing. Let's see how the US market looks after Friday's close:
SPX
SPX lost 13.65 points to close at 1089.41, just below 1090. Its daily MAs went lower.
Nasdaq
Nasdaq fell 20.64 points to close at 2257.04. It closed right at its 10-day MA.
Although the market tried to bounce, it was not able to close above the 10-day MA. VIX did come down from last week's 40+ levels to 32. For the new week, the market is definitely struggling to bounce from May's slump. However, Europe's financial problems may be worse than that of the US, as China's Premier warned of a possible double-dip in the global economy's attempt to recover. Charts are certainly showing the same concerns. While last Thursday's jump was encouraging, Friday's slip back to the 10-day MA kept the market in a vulnerable position. BP's inability to stop the oil leak can keep the energy sectors on their heels. The longer this disaster drags on, the weaker oil services will get. Without the energy sectors, the market will have difficulties trying to bounce. Once again, SPX 1080 will be an important level to watch. Below SPX 1080, the market could sink lower again to test 1040. At the end of the week, on Friday, we'll get the latest unemployment rate report. The initial claims could provide some clues the day before. If the market is able to rise above the 1100 level, the next resistance is between 1120 and 1140. SPX will have to close above 1160 to become bullish.
Sector Watch
GLD (gold)
GLD bounced back above its daily MAs last week. It also closed above $118. With all the uncertainties in the financial markets, gold continues to attract investors. A move above $120, should send GLD to new highs. Gold miners don't all share GLD's bullishness. GOLD is an exception, as it is back to testing the resistance at $88, above which GOLD can sail into the $90s. ABX and NEM have also been strong. However, I'm a little wary of the gold miners because of the overall market conditions.
OIH (oil services)
OIH closed below $100 last week. We could see this sector sink back down to 2008 lows, which could mean OIH going back to the low 70s, or even high 60s. If the oil leak continues until August, we could see BP below $30 before then, and into the "teens" before the end of the year! RIG, DO, SLB, HAL, BHI all are showing tremendous weakness. Any bounce could bring in more shorts and see more investors cashing out.
XME (metals and mining)
XME bounced strongly last week, touching the 20-day MA, but did not close above. Its MACD is trying to higher. Coals were very strong; WLT and CLF are once again leading the pack. XME will need to rise above $54 to turn bullish; below $50 could send it down to visit $46 again.
SOXX (semiconductors)
SOXX also showed resiliency. It rose above the 20-day MA and closed just below. However, its 10-day MA has flattened again. MACD turned up. These could be the first signs of bottom-forming.
Good night and HappyTrading! ™ 
(click to see our Facebook Page)
