Last weekend, in my Market Forecast, I said:
"For the new week, the market looks to be on its way to break higher. The daily upper BBs have opened up; the 10-day MAs are crossing above the 20-day MAs. In addition, the 30-day MAs are trying to turn up. These are all bullish signals. This weekend, China announced its intention to loosen yuan's peg to the US dollar. A higher yuan would make Chinese exports more expensive and help manufacturers of other countries, including the US."
The week turned out to be a big disappointment. On Monday, the market gapped up, but, profit-taking immediately started. On Tuesday, the market was hit by lower-than-expected home sales. Although selling continued, we were able to cash out some winning trades on the long side. The market stayed weak on Wednesday and Thursday, with SPX falling below 1080, the previous support level. On Friday, after a weak open, the market bounced back a little. We still managed to close quite a few winning trades for the week.
For the week, the Dow was down 306.83 points; SPX dropped 40.75 points; Nasdaq fell 86.32 points. Gold took a huge drop on Monday, but, climbed back up above $1255/ounces by the week's end. Oil was slightly up for the week with a pop on Friday. The market turned quickly last week, going from nearly breaking out on Monday morning to almost breaking down by the week's end. Asian markets were mixed tonight at the time of this writing. China's Shanghai SE Composite Index (SSEC) continued to fall, while Hong Kong's Hang Seng was still strong. Here's how the US market looks after Friday's close:
SPX
SPX added +3.07 points to close at 1076.76, still below the 1080 level. The daily MAs and MACD were lower.
Nasdaq
Nasdaq gained +6.06 points to close at 2223.48. Its daily MAs and MACD also went down.
Both SPX and Nasdaq closed below their respective daily MAs. In addition, their daily MAs and MACDs have turned down. VIX popped back up and tested 30 last week. For the new week, this week is still range-bound with a bearish bias. The longer the market hangs below SPX 1080, the more likely we'll see SPX test 1040 soon again. However, if the market rises above 1100, we'll likely see a new bullish formation in SPX's daily MAs. In order for that to happen, we'll need to see some strong leaders on the market. Financials, especially, will need to be strong.
Sector Watch
GLD (gold)
GLD has risen above $122 again. Its daily MAs and MACD are also pointing up. Basically, GLD is at the same place as a week ago. GLD still appears to be on the verge of breaking out, and, I still think we'll see $1300 gold soon. Gold miners have all been strong and have also broken out. GOLD is still one of the strongest, making a new all-time high last week. Both ABX and NEM are also on the verge of breaking out. PAAS, a silver miner, is also looking strong.
USO (oil)
USO took a quick drop with the market in the beginning of the week, but, managed to pop above its daily MAs on Friday. $36 is still the breakout point, which it touched on Monday morning. If USO rises above $36, it'll like test $40.
XME (metals and mining)
XME sank all the way below the $50 level, but, managed to come back above it on Friday. It is in a neutral position right now. Getting above $52 could turn it bullish again. Tonight, China asked major coal companies to keep the prices stable. We'll have to see how this affects the US coal companies. BTU has been very strong, especially in last week's weak market environment.
OIH (oil services)
OIH remained weak. BP sank to a new 14-year low. The oil spill in the Gulf of Mexico continued to trouble this sector. Oil services have hurt the whole energy sector. Without the energy sector, the market has been having a hard time to sustain any strength.
XLF (financials)
Besides losing the energy sector as one of the leaders, the financials have been troubled by the uncertainty of the financial reform. On Friday, however, the reform bill was passed, and the financial stocks rallied. GS jumped $4.68 and tested $140, after sinking below $133 during the week. XLF is right at where its 10-day and 30-day MAs meet. Breaking above this pivot point could send it up to test $15 again. This $15 level remains the breakout point. CME and ICE bounced, as the new reforms on swaps were deemed to be favoring the exchange companies.
This market is very unbalanced. There are still some pockets of strength here and there. But, overall, the market still carries a bearish bias. The energy sector is really having a hard time to gain any strength. With lots of speculation on the Chinese currency's movement, there's a lot of uncertainties with mining companies. We'll watch the support and resistance levels carefully this week.
Good night and HappyTrading! ™ 
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