Wang’s Happy Trading

First of all, remember tomorrow is Martin Luther King, Jr. Day, and, the market is closed.

Last weekend, I said,

“The market sentiment continues to be terrible. For the new week, earnings are starting. The market really needs some positive catalysts to draw the buyers back in; whether it comes from earnings, the Fed, or something else. Without reversing the sentiment, it is hard to expect big buyers to commit themselves. Without seeing committed buying, it is likely that more people are going to cash out on bounce attempts. On the support side, we’ll be watch SPX 1375 and Nasdaq 2400. If the sentiment does change, the market could have a lot of room to rise, for it has really dropped quite far in a short amount of time (100 points for SPX in about two-and-a-half weeks; Nasdaq? almost 300 points in the same time frame!).”

The sentiment on the market was still gloomy, although IBM and GE did provide some enthusiasm. Bush’s $150 billion tax cut proposal, as a stimulus to the economy, was met with lethargy, but, more plans to boost the economy may be coming.

On Monday, the market had a little something to cheer about as IBM announced better-than-expected preliminary earnings results. On Tuesday, the market was hit by soft retails data and Citigroup’s big write-down in its earnings. On Wednesday, the market rallied to green, but, succumbed to the late selling and closed in the red. On Thursday, the market returned to its foul mood and stumbled, as the Dow lost more than 300 points. On Friday, both IBM and GE provided positive news and the market tried to stage a rally in the morning. But, perhaps wanting more than Bush’s proposed tax cut plan, the market closed slightly in the red.

Here’s how the market closed on Friday:

BTK (biotechs) held up all week, but, finally let things go on Friday, dropping 2.9%. On the other hand, SOX (semiconductors) gained back everything that it lost the day before, adding +2.43%. GLD (gold) and GDX (gold miners) decided to go up a little after a week of profit-taking. OIH (oil services) traded as low as $155.18 after SLB’s disappointing earnings, but, came back up to close at $161.60. XME (metals and mining) faired better than most sectors, up +1.64%, perhaps in anticipation of more news on BHP/RTP merger possibilities. FXI (Chinese ADRs) bounced up +5.31%!

SPX

SPX lost 8.06 points to close at 1325.19. It closed above its support at 1320. The MACD difference is getting huge. This is starting to signal that the bottom is here, or that it is near.

Nasdaq

Nasdaq slid 6.88 points to close at 2340.02, 10 points below its support at 2350. Its daily MACD difference is also very big.

For the new week, the market could look to start drawing a bottom. If SPX 1320 and Nasdaq 2350 don’t hold, we might be looking at SPX 1250 and Nasdaq 2200 for support, which won’t be pretty, to say the least! The “R” word has made a lot of people nervous (so, I’m not going to mention it again), and, I don’t think it does anyone any good if it does happen, since the US economy is connected with to world’s economy. I also think that the Fed should step in right now and act decisively. 2 weeks (until 1/30) may not seem to be a long time. But, in 2 weeks, without any change in the market sentiment, the market could lose another 5-6%! Earnings season is also heating up, and, we’ll be paying attention to those.

I’ll be back tomorrow to look at discuss some individual sectors. Hope you’re enjoying your weekend (and, for some, a long weekend)!

Good night and HappyTrading! ™