The market broke a 2-week winning streak to end lower. In my Market Forecast last weekend, I wrote:
"For the new week, we'll have to see if this market can continue its
rally that started 2 weeks ago. One bullish sign is that for SPX and
DJI, the 10-day MA has risen above the 30-day MA, and the MACDs are
still bullish. The market really needs to see a bigger jump. SPX needs
to break above 1280 to get the shorts to cover. Financials are once
again the key. While they may not lead the market up, but, at least,
we'll need to see them going higher in order for the market to rally.
Energy stocks and fertilizers seem weak, which we'll take a closer look
in Sector Watch."
Well, financials gapped down lower on Monday and pretty much set the tone for the week. Energy and fertilizer stocks also plummeted. After a weak Monday, the market gave in to selling pressure on Tuesday, as the Fed avoided mentioning further quantitative easing. We traded on the downside and booked some quick profits. Stocks slide lower on Wednesday, and, we booked more profits on the downside, including an intraday +78% winner on FFIV puts. The market tried hard to bounce on Thursday and Friday, but, was not able to get very far.
Here are our closed trades for the week:
- 09:14 | HappyTrading MOS ($46.80) Sold to Close 12P50 Dec 50 put, at $3.35 +34%
- 08:45 | HappyTrading FFIV ($103.90) Sold to Close 12P105 Dec 105 put, at $2.45 +78%
- 08:17 | HappyTrading FFIV ($104.40) Sold to Close 12P105 Dec 105 put, at $2.15 +68%
- 08:16 | HappyTrading MOS ($46.90) Sold to Close 12P50 Dec 50 put, at $3.20 +28%
- 12:26 | HappyTrading GOOG ($631.00) Sold to Close 12C630 Dec 630 calls, at $5.50 -26%
- 12:02 | HappyTrading WYNN ($105.60) Sold to Close 12P110 Dec 110 put, at $5.00 +47%
- 11:52 | HappyTrading WYNN ($105.60) Sold to Close 12P110 Dec 110 put, at $4.90 +44%
- 08:09 | HappyTrading IBM ($192.50) Sold to Close 12C195 Dec 195 calls, at $0.55 -45%
- 12:40 | HappyTrading GS ($97.80) Sold to Close 12P100 Dec 100 put, at $3.50 +6%
- 07:26 | HappyTrading AAPL ($391.60) Sold to Close 12C400 Dec 400 calls, at $1.51 -70%
For the week, the Dow was down 317.87 points; SPX lost 35.53 points; Nasdaq fell 91.52 points. Both gold and oil took sharp falls, with gold trading under $1600/ounce and oil falling back to $93/barrel. At the time of this writing, Asian markets were mostly down. Let's take a look at where the US market stood after Friday's close:
SPX
On Friday, SPX added +3.91 points to close at 1219.66. It closed below its daily MAs. The MACD was slightly down.
Nasdaq
Nasdaq gained +14.32 points to close at 2555.33. Its daily MAs and MACD slid.
Even though VIX stayed weak and closed below 25. Both SPX and Nasdaq closed below their respective daily MAs. Further, their respective 10-day MAs turned down again! For the new week, with only 2 weeks left in trading for 2011, both SPX and Nasdaq are in the negative territory. It is becoming less and less likely that the market will get a holiday rally. The market will need to go above 1260 to get any strength on the upside. If it falls below 1200, we may see further selloff. Commodity sectors all look weak. Financials still hold the key to the movements of the broader market.
Sector Watch
XLF (financials)
XLF fell below $13 again. It found some support at $12.5. GS took a tumble last week, barely closed above $90. MA finally gave up some grounds. V still held up well. WFC and JPM are relatively healthy. CME and ICE barely held up, but, could see further breakdowns.
OIH (oil services)
OIH is looking really weak, with daily MAs going into a new bearish formation. RIG and DO continue to slide lower.
XME (metals and mining)
XME are holding up ok. But, all of its daily MAs are pointing down. Coals are really weak: CLF, BTU, WLT, ANR.
MOO (agriculture)
MOO is also going into a new bearish formation and looks like it's hanging on a cliff. CLF, POT, MOS, AGU could all see a new leg down in the new week.
Good night and HappyTrading! ™
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