Wang’s Happy Trading

It has been a tough 1st week of 2008 for the market. For the week, the Dow lost 565.69 points; SPX gave up 66.86 points; Nasdaq suffered a whopping 169.81-point slide!

Last weekend, I said, “For the new week, if the market continues up, I’ll be looking to see if Nasdaq can break above 2725 and SPX above 1500. If these 2 major indices can move above the just mentioned resistances levels, I think they could have enough momentum to catch their daily upper BBs. On the support side, we’ll need to see the 20-day MAs hold. It is encouraging to see that the 30-day MAs have turned up.”

Well, the 20-day MAs didn’t hold on Monday, and we started to look at the supports below. Tuesday was a holiday, 1/1/2008. On Wednesday, the market, hit by record-high commodities and weaker-than-expected manufacturing data, stumbled further. On Thursday, the market tried to establish a bottom, while the agriculture sector made new highs. On Friday, the market got spooked by weak jobs report, and tumbled without finding strong footholds. The Dow was down 256.54 points; SPX lost 35.53 points; and Nasdaq fell 98.03 points.

Here’s how the market looks after Friday’s close:

VIX jumped back to almost 24. Most sectors were in the red. UNG (natural gas) was an exception and gained +1.15. INX2 (Internet) lost almost 4%, closing below its November low. SOX (semiconductors) dropped 4.71% and closed blow its low of “July 2006″! XME (metals and mining) stumbled 4.28%. PBW (clean energy) was down 3.89%. HGX (housing) and XLF (financials) continued with their plunges, losing 5.5% and 2.84%, respectively.

SPX

SPX lost 35.53 points to close at 1411.63. It closed just above its November low (1410). Its daily MAs haved turned down and the MACD slid lower.

Nasdaq

Nasdaq fell almost 100 points to close at 2504.65. It broke below the support at 2550 by almost 50 points!! The next support level is at 2450 (not visible in the above chart), the low of August 2007. Its daily MAs have also turned down and the MACD went lower.

For the new week, the market has gone down quite far in a short amount of time and could see some bounces. The market sentiment right now is not very strong. Unless there are some catalysts (news, events, and such) to change that perspective, any bounces could be seen as chances for people to cash more money out. At the same time, there will be eager people that are looking to “bottom-fish”. If SPX 1410 holds, it’ll be very encouraging. The 1440 level now may be seen as the nearest “resistance”.

Some of the high-flyers from 2007 (solars, BIDU, RIMM, or even GOOG and AAPL) may have more room to fall. On the more bullish side, gold (GLD, GDX and components) and the agriculture sector (MOO and components) may have more room to go up, especially if the market sentiment improves. These, we’ll look at more in detail tomorrow in my Sector Watch.

Hope you’re enjoying your weekend!
Good night and HappyTrading! ™