The market ended on a down note last week, as oil spiked up above $139/barrel. On Friday, the Dow was down 394.64 points; SPX lost 43.47 points; and Nasdaq tumbled 75.38 points. Just the day before, on Thursday, the Dow was up +213.97 points, with SPX adding +26.85 points and Nasdaq gaining +46.80 points! The market has been seeing some big mood swings!
Two weekends ago, in my Market Forecast on 5/26, I said, “…we could see one last burst in USO before it finds the near-term top.” And, here it is!! So, is oil now close to a near-term top, and how will the market respond if it is? Let’s take a closer look at the overall market and some individual sectors.
The market is again in a dangerous spot. SPX is threatening to start a new bearish formation while Nasdaq is being supported by its 30-day MA. SPX looks to be testing its supporting range of 1350-1360. It has broken below the 1375 support. Oil has just spiked up, but, I do believe that the near-term top is close. This could be the “one last burst” that I was looking for 2 weeks ago. A lot of times, when “seasons change” (money rotation happens), the market goes through wild swings. For the new week, we’ll still tread waters carefully and see how the market does early in the week. If the market rebounds, we should see the market try to establish a trading range. If the market continues to slide, we’ll have to be ready to play the down side.
XLF dropped another 5% on Friday, and it’s pushing on its lower daily BB again. The financials have been sliding for a month now, and, it still has not shown clear signs of stablilizing.
USO experienced a powerful jump of +8% on Friday. It has poked through its daily upper BB. But, often this kind of pop can be a signal for near-term top. If its MACD difference stays negative (the blue bars), it is a good sign that the near-term top for oil is here.
XME (metals and mining)
XME dropped just 0.75%, and, it’s still looking healthy. Its bullish trend is still intact and can be staging for a new breakout. Steels and coals have been exceptionally strong, recently.
BTK tried breaking out on Thursday, only to get pulled back with the rest of the market on Friday. But, it managed to have a positive week. Its daily chart also shows a newly developed bullish formation. It’ll be a good sector to keep an eye on if the market bounces.
We might still see some wild actions this week. “Be careful and maybe a little more patience” is what the market is saying to me.
Good night and HappyTrading! ™