Wang’s Happy Trading

What a week!! The volatility was way high, jumping from 17 to above 24!! Most sectors were down, but, we managed to make some good money buying puts!!

Since the recent down-turn seems to be, at least initially, caused by housing and credit “woes”, let’s start our “sector watch” with the financials, XLF.

XLF (financials)

This sector fell off a cliff this week, on volume that tripled the average. I think if this market is going to rebound, we can look for clues in this sector. Since the financials started it all, if they find a bottom, it should bode well for the rest of the market. Let’s watch that “33″ for support. Also, I mentioned on Thursday that, “On 8/7, there’s another FOMC meeting to determine the interest rates.” Could the recent pressures on the financial sector prompt the Feds to bring relief by either softening the language on inflation or actually lowering the rates? We’ll keep that in mind as a possibility.

Interestingly enough, the dollar rose this week, which caused the gold price to drop.

If the Feds actually lower the rates on 8/7, the dollar will drop (and, the gold will rise again). So, they better pump that dollar up now! Hmmm… food for thought…

XME (metals and mining)

XME has also been feeling a lot of pressure. Metals and Mining have been pumped up so much, partially due to all the M&As. When the market slides, they have a lot of room to go down. XME closed the week below its weekly MAs. Let’s watch for the lower weekly BB as a support, which should be around 57.5 next week!

Oil Refiners (VLO, SUN, HES, FTO, TSO, MRO…etc)
There are no ETFs that I can find which tracks solely this group. Please let us know if you know of one. But, these guys got “grilled” this week, and, it looks like they could have a little further to go. Interestingly, USO (oil) keeps on rising (+0.74 points for the week) while OIH (oil services) took a hit late in the week (-6.48 points for the week), after reaching a new all-time high of 191.11 on Monday. And, I’m getting gas for less than $3/gallon this week in California, which hasn’t happened for over a month! Of course, I’m not complaining! Are people finding cheaper gasoline this week elsewhere in the country also?

USO (oil)

USO continues to ride its weekly upper BB higher, although the volume this week is not very high!

SOX (semiconductors)

SOX retraced its steps with the rest of the market these past couple of weeks. But, it did close this week above the 500 support, and its weekly MAs are still firmly in their bullish formation.

BTK (biotechs)

Although BTK had a down week with the broader market, its 20-week MA is actullay rising, crossing with its 10-week MA. This could mark a turning point.

If the market bounces next week, I’d look for more money being rotated into the techs. So, we’ll keep a close watch on the semiconductors and the biotechs!

I’ll be back tomorrow for Part II of the weekly forecast.

Enjoy your weekend and HappyTrading! ™