Last weekend, in my Market Forecast, I wrote,
"For the new week, the technicals are still carrying a bias to the downside. The M&A activities and the speculations for them are offsetting the inconsistency in the latest economic reports. The M&A activities are bringing buyers into some sectors. However, the industrials have been weak on further economic worries; and thus, this market is still very mixed. We'll have to see if we can get some favorable economic data to get the market back in rallying mode. We have GDP report and consumer sentiment on Friday; and, of course, the unnecessary "weekly" jobless claims on Thursday (once every 2 to 4 weeks would probably be a lot more accurate and won't make people so jittery). The market will have to at least get above the daily MAs to get some breathing room (SPX 1110; Nasdaq 2250). The downside potential is still there and the market will need to see strength early in the week to prevent the downside momentum from building up."
Since the market did not see much strength at the beginning of the week. The downward momentum did indeed built up. And, the market sank lower. It was not until Friday that we saw some relief rally after Fed Chariman Bernanke pledged to act when necessary. On Monday, the market was strong in the morning, but, slid lower into the close. On Tuesday, lower home sales discouraged investors and SPX closed below 1060. On Wednesday, the market touched SPX 1040 in the morning and bounced higher. We locked in some profits on our downside plays in the morning. Thursday demonstrated the downside momentum as the market opened higher on lower jobless claims but could not hold the gains and closed in the red. The downside momentum continued into Friday's open, but, the market soon bounced higher after getting support from the Fed. We wrapped up a very nice month for August, including 100% green on last week's trades.
For the week, the Dow finished lower by 62.97 points; SPX slid 7.1 points; Nasdaq fell 26.13 points. Both oil and gold closed slightly higher. At the time of this writing, Asian markets were mostly higher. Let's take a look at how the US market looks after Friday's close:
SPX
SPX added +17.37 points to close at 1064.59. It closed below its 10-day MA. The MACD went up.
Nasdaq
Nasdaq gained +34.94 points to close at 2153.63. Its MACD turned flat.
Both SPX and Nasdaq tested critical support levels (SPX 1040; Nasdaq 2100) and bounced back. However, both indices closed below their respective daily MAs. For the new week, we'll look to see if we can continue to get improved economic data, especially the consumer confidence and Chicago PMI on Tuesday to perhaps set the tone. On Friday, we'll get the latest payroll numbers and unemployment rate. VIX actually closed lower last week and closed below 25. On the other hand, both SPX and Nasdaq are showing newly developed bearish formation. If the indices can close above the 10-day MA, the market could gain some upwards momentum. SPX 1110 and Nasdaq 2250 remain the levels above which the market can turn bullish. once again, the market will need to see strength early in the week to continue higher. If the market does not go above the 10-day MA early in the week, the downside danger should increase. Industrials will be very important. So, we'll be watching the miners closely.
Sector Watch
XME (metals and mining)
XME tested the support at $46, but managed to bounce back. The 10-day MA turned flat. Coals were strong on Friday. CLF and WLT are still among the fastest movers. FCX was really strong on Friday, rising +6.09%. X bounced +4.07%.
GLD (gold)
GLD closed at $121.01 last week, above the $120 level. Its daily MAs are showing a new bullish formation. One thing to watch, though, is that if the stocks rally higher, GLD may not go higher just yet. If additional money goes into stocks, there will be less to go into gold. However, if the equities market goes higher, gold miners are ready to break out. GOLD, NEM, and ABX are looking really strong.
USO (oil)
USO also bounced higher and closed above the 10-day MA. If USO rises above the daily MAs, it could reverse the recent downward trend. Stronger oil could also indicate strength for energy stocks.
MOO (agriculture)
MOO came down from the recent rise above $44, but, managed to close right back up to that resistance. Its daily upper BB has already started turning higher, signaling for a possible new breakout. BHP seems to be holding its bid on POT for now. Any new merger announcements or rumors could send this sector higher. AGU could be out of the running for now, as it just purchased AWB. MOS and CF remain to be the next takeover targets.
Good night and HappyTrading! ™ 
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