Market Forecast + Sector Watch: SPX, Nasdaq, GLD, XLE, XLF, XME

Last weekend, in my Market Forecast, I said,

"For the new week, we could see some major advancements in the market by the week’s end.  The important thing is for the market to keep above SPX 1080 and Nasdaq 2150, while letting off some steam.  Techs will see a lot of important earnings:  AAPL (Monday), YHOO (Tuesday), EBAY (Wednesday), AMZN (Thursday), and MSFT (Friday).  Miners were relatively quiet last week and could be the ones to take the market higher.  Financials saw profit-taking and got dragged down by BAC and GE at the end of the week; this sector will need to see some good earnings in the new week to help the market.  If the market breaks above SPX 1100, it will have some room to run."

While the earnings from techs were mostly good (AAPL, YHOO, AMZN, and MSFT all reported well and traded higher.  AMZN went up more than +26% on Friday!!), the market was very cautious.  It tested SPX 1100 a couple of times, but, was not able to break it.  Then, it tested the support levels a couple of times and was not able to break them either.  Both SPX and Nasdaq ended right at the above-mentioned support levels.  On Monday, commodities took the lead and push the market to test SPX 1100.  After the market, AAPL reported stellar earnings.  On Tuesday, AAPL jumped, but the rest of the market didn’t.  After the market, YHOO gave a good report card.  On Wednesday, the market tried attacking SPX 1100 again, but, ended down to test the support levels, instead!  On Thursday, the market bounced off of the support levels and returned to positive territory for the week.  After the market AMZN blew the top off of its earnings estimates.  On Friday, AMZN jumped to a new all-time high trading near $120/share; however, the rest of the market did not follow and finished at the support levels.

Besides some big movements due to earnings, the market as a whole was trapped in a fast oscillating, and yet, very tight range.  VIX tested 20, and bounced to close above 22.  We didn’t do much trading, but, took some profits off the table:

October 23, 2009
01:01 | HappyTrading MA ($230.40) Sold to Close MALKF Nov 230 calls, at $9.80 +15%
12:56 | HappyTrading GOOG ($554.00) Sold to Close GOPKN Nov 570 calls, at $7.00 +12%
11:50 | HappyTrading GOOG ($555.50) Sold to Close GOPKN Nov 570 calls, at $7.20 +15%
08:52 | HappyTrading MA ($230.90) Sold to Close MALKF Nov 230 calls, at $10.00 +18%

October 21, 2009
07:14 | HappyTrading GOOG ($557.75) Sold to Close GOPKN Nov 570 calls, at $8.00 +28%

As I said on Wednesday, "be more careful and there’s no hurry chasing trades.  I think it’s prudent to keep a health cash position until things are clearer."

Oil charged up to a new yearly high, trading above $80/barrel; still no help to energy stocks last week.  Gold treaded water and fluctuated in a tight range.  For the week, the market was basically flat, with the Dow down 23.72 points, SPX losing 8.08 points, and Nasdaq sliding 2.33 points.  At the time of this writing, Asian markets were mostly higher to start the week.  Let’s see how the US market looks after Friday’s close:

SPX

On Friday, SPX fell 13.31 points to close at 1079.6.  It closed just below the 1080 level.  The MACD went down.

Nasdaq

Nasdaq dropped 10.82 poinst to close at 2154.47.  It closed just above the 2150 level.  Its MACD slipped well.

The market’s reluctance to break above SPX 1100 demontrated some fatigue.  At the same time, buyers came in to maintain the support levels (SPX 1080 and Nasdaq 2150).  Remember, these support levels were the resistance levels back in September!  If you study the charts above carefully, you’ll see that, essentially, after the market broke through these levels on October 14, it has not really gone anywhere!  It’s been consolidating for the past 8 trading sessions.  For the new week…

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