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Market Forecast + Sector Watch: SPX, Nasdaq, XLF, XRT, FDN, BTK     

Happy Thanksgiving week!

Last weekend, in my Market Forecast, we discussed,

"For the new week, we may start to see some bounces.  SPX now has resistance between 1400 and 1420.  Markets now may be more "news-driven" than usual as the recent pullback have rendered stocks range-bound for the near term.  If the markets do bounce, we'll likely see a stock-picking environment.  Financials broke down last week as industrials and techs fell lower.  On the downside, the support between 1360 and 1380 will be very important."

Well, the market was indeed driven by news last week.  The overall tone remained negative as investors carefully monitored the progress on getting a budget deal from Congress.  Things were range-bound on Monday and Tuesday, but took a nosedive on Wednesday after not receiving new insights from Obama's media conference.  Stocks continued to slide lower until late morning on Friday when Congressional leaders came out and gave markets a glimmer of hope that a bi-partisan deal could be done.  SPX ended the week just shy of 1360.

For the week, the Dow was down 277.08 points; SPX lost 19.97 points; Nasdaq fell 51.74 points.  Gold slid below $1720/ounce and oil was flat, holding at around $87/barrel.  At the time of this writing, Asian markets were mostly positive, but, China was still weak.  Here are where the US markets closed on Friday:

SPX

On Friday, SPX added +6.55 points to close at 1359.88, just shy of 1360.  The daily MAs and MACD slid.

Nadsaq

Nasdaq gained +16.19 points to close at 2853.13.  The daily MAs and MACD were down.

Both SPX and Nasdaq fell below their respective support levels during the week and barely bounced back on Friday, after encouraging comments from Congress.  Surprisingly, VIX took a sharp fall last week, closing at 16.41.  For the new week, if we continue to see progress being made by Congress on a budget deal, the market could experience a bounce.  But, things are still very unstable.  Resistance could be strong between 1380 and 1400 on SPX.  For Nasdaq, 2900 to 2975 could be hard to break through.  Industrials have been very weak.  Financials just broke down last week.  Since it's Thanksgiving week, if things bounce, we should be watching the retails and techs.

Sector Watch

XLF (financials)

XLF just developed a new bearish formation in its daily MAs.  It closed above $15.  The support at $15.6 could now turn into resistance.  Big banks, GS, WFC, JPM, and BAC, all broke down last week.  MA and V tried their best to hang on.

XRT (retails)

XRT fell below $61 last week.  KORS and SHLD broke down after earnings.  ROST sank lower.  TGT reported positive results and hung on.  COH bounced a bit.  GPS also delivered a good quarter, but, its stock didn't go anywhere.

FDN (internet)

This group has been badly beaten since GOOG's earnings miss.  AMZN and EBAY should be interesting to watch as Thanksgiving draws near.  CRM reports on Tuesday after the close.  Related to CRM are FFIV, VMW, and EQIX.

BTK (biotech)

BTK bucked the trend last week and closed higher for the week.  GILD, CELG, and REGN all had positive results on their drugs.  All three experienced nice pops, although CELG gave back some of its gains.  ALXN, ONXX and MDVN have been beaten down and could experience further bounce if the market is in a buying mood.

As long as we keep hearing progress on the budget deal from Congress, we should see some buyers coming back into the markets.  On Tuesday, we could hear more about the pending deal on the latest round of bailout fund for Greece.  Markets are still news-driven and buyers are itching to pick up beaten down stocks.  If things do bounce, watch the resistance levels carefully, as people that haven't gotten out may want to lock in their profits for the year.

Good night and HappyTrading! ™

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