Wang’s Happy Trading

Last week, I said, “The market looks prepared to push things higher if the Fed continues to show its readiness to help the economy and the subprime mortgage problems. We’ll continue to hold lots of cash and make quick trades as the opportunites present themselves, until the market demonstrates a confirmed reaction to the Fed’s next rate decisions.” We made very few trades this week, comparing to some of our busier weeks, and are still holding cash to wait for clearer signals from the market.

On Monday, buyers continued to position themselves, as we waited for the Fed’s rate announcements. On Tuesday, the market continued to glide up before the Fed announcements. I continued to wait, as I said on the members’ board, “I’m pacing myself on the buys, but, it looks like the market is already moving up!” Then, the Fed suprised the market with a rate cut of only a quarter percent and not so dovish comments. The market did not react well at all. I said in the evening, “It is good to be holding lots of cash right now. The drop was sharp today and it may take a few days for the market to sort things out. Things may also be more volatile in the next few days. We’ll be watching the 20-day MA closely to see it can hold.” On Wednesday, the market jumped right out of the gate, almost completely erasing previous day’s loss, as the Fed came out with new announcements in the morning, perhaps to try to calm the global financial markets. The sharp gains fizzled into the afternoon, but, the market managed to keep things on the positive side. On Thursday, the market continued with volatility and managed to close flat. On Friday, the CPI data was higher than expected and the market got nervous about the inflation again. It was another volatile day, with the Dow losing 178.11 points, SPX slumping 20.46 points, and Nasdaq sliding 32.75 points.

Here’s how the market looked at Friday’s close:

VIX went up +3.15%. Gold (GLD) was flat. PBW (clean energy) found buyers and added +1.55%. The rest of the market was on the weak side. INX2 (Internet), SOX (semiconductors) and SWH (software) all contributed to Nasdaq’s loss. USO (oil), UNG (natural gas), and OIH (oil services) gave back some gains made earlier in the week. XME (metals and mining) and GLD (gold miners) didn’t do well either, losing 1.62% and 1.64%, respectively. XLF (financials) and HGX (housing) both gave up more than 2%. FXI (Chinese ADRS) was down 2.58%.

SPX

SPX lost 20.46 points to close at 1467.95. It closed just above the 20-day MA. The MACD is sliding a bit. We’ll have to see if the 20-day MA holds next week.

Nasdaq

Nasdaq gave up 32.75 points to close at 2635.74. It closed just below its 20-day MA and the MACD slid. It is critical to see the Nasdaq bounce off here from the 20-day MA. There’s also the support at 2625.

The market is in a critical condition. For the new week, we’ll be watching to see if the 20-day MA (cyan line) can hold. To feel more bullish, we’ll need to see the 30-day MA (black line) turn up, which would probably take a rally of a few consecutive days. If the market can’t hold the 20-day MA, we might be looking for some downside plays.

I hope you’re enjoying your weekend! I’ll be back to take a look at some sectors, some of which are also in critical conditions.

Happy Saturday and HappyTrading! ™