Last weekend, in my Market Forecast, we discussed,
"For the new week, the market looks very weak, but, could perhaps use a
bounce. News that France and Germany are looking at new options to help
combat with the financial crisis in Europe may inspire a bounce in
world markets. But, unless there are solid solutions coming out of
Europe, this bounce is not likely to hold."
On Monday, the market did get a big bounce on the new efforts in Europe. The market took a rest on Tuesday,
and we locked in some profits. On Wednesday, global central banks took
a collective action to pump liquidity into the global financial systems
and stocks jumped even more. The market took another breather on
Thursday ahead of US' unemployment rate report. We continued to lock in profits.
Friday brought a nice surprise as the unemployment rate dropped to
8.6%, below the dreaded 9%. But, as expected, the market could not make
further advance without some consolidation.
Nevertheless, the market had a tremendous week, the best in almost 3 years! The Dow was up +787.64 points; SPX added +85.61 points; Nasdaq gained +185.42 points. We also did very well, finishing another perfect week with 100% of the trades in profit.
Gold managed a small bounce, trading near $1750/ounce. Oil powered
back to $100/barrel. This evening, Asian markets were mixed, at the
time of this writing. Let's take a look at where the US market closed
on Friday:
SPX
On Friday, SPX slid 0.3 points to close at 1244.28. The 10-day MA turned up and the MACD went higher.
Nasdaq
Nasdaq added +0.73 points to close at 2626.93. It closed right at its 30-day MA. The MACD glided up.
It was apparent that the global governments knew that they had to
step in to prevent global financials markets from breaking down
further. The collaborative efforts from the global central banks
quickly turned the markets back up. The question now is, "Can the
markets keep the momentum going?" Next week is going to be a crucial
week, as EU leaders meet to try to save Europe's currency union. This evening, Italian PM Monti unveiled a 30 billion euro package of austerity measures to shore up Italy's strained public finances and help to stem a debt crisis threatening to overwhelm the euro zone.
For the new week, the market will start from a neutral position. SPX
did manage to close above 1240 last week. The immediate resistance is
between 1260 and 1280. It'll be interesting if the market does get to
test 1280 again, which it was not able to break through in October.
Financials will once again be key. Last week, the financials made a
solid climb. We'll have to see if they can keep it going. One thing
that has been catching my attention is that the Dow has been
outperforming both SPX and Nasdaq, which tells you that big money has
been buying bluechip stocks!
Sector Watch
GLD (gold)
GLD
came back up with the stock market last week. It still looks
range-bound. Keep an eye on GLD. It could test $175 again, above which
could be a breakout. Gold miners are not as strong.
XME (metals and mining)
XME closed above the daily MAs. Coals were very strong last week. CLF and WLT looked good. CAT and JOYG were very strong.
MOO (agriculture)
MOO underperformed last week. CF, POT, MOS, and AGU were relatively weak, comparing to the broader market. MON was down 3.8% on Friday as unfavorable news came out on its engineered corn.
This stocks actually look bearish. If the broader market continues to
push higher, we'll see a bounce in these sooner or later.
XLF (financials)
XLF
closed just under its 30-day MA. But, like many other sectors, its
10-day MA is beginning to turn up. If XLF can go above $13 and stay
above, I'd consider it bullish sign. GS jumped above $102 on Friday
intraday, but, barely closed above $97. We could see it challenge $100
again. BLK is very strong. MA and V have broken out, finally.
Good night and HappyTrading! ™
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