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Market Forecast + Sector Watch: SPX, Nasdaq, XLF, USO, XME, DBA, MOO

The market went through another volatile week last week, ending with a bounce on Friday that allowed the Dow to record a win for the week. Oil actually went lower for the week (although we might not have felt the easing at the gas pump yet), and, news came out this weekend that Saudi Arabia was preparing to increase its oil production. Agriculture shares have been very strong and coal plays have also been making new all-time highs.

Let’s take a closer look at the market indices and various sectors:
SPX added +20.16 points to close at 1360.03. It managed to hold above the 1360 support, but the daily MAs slid. The MACD, however, went higher.

Nasdaq jumped +50.15 points to close at 2454.5. Its 20-day MA coincided with 30-day MA. The MACD flattened.

For the new week, we have LEH reporting earnings on Monday and GS reporting on Tuesday. LEH seemed to have let the bad news out last week, as its shares popped back up on Friday. I think these earnings reports could be very influential to the market’s mood in the new week. The market certainly needs to see the financial sector stabilize. Also, if the crude oil continues to decline, it could help the market to gain confidence. The market’s powerful jump on Friday showed that the buyers are standing by and ready to play. It is also going to be options expiration week, so, volatility and manipulations are likely givens. VIX fell 9% on Friday to close just above 21. We’ll see how it handles 21 on Monday. If it shows room to fall more early in the week, the market may be playing the expiration to kill the values in the puts. Overall, I’m still taking the cautious stance, but, am a little more optimistic than last weekend.

Sector Watch
XLF (financials)
XLF bounced up last Thursday and Friday, even though much negative focus was “put” on LEH. Even LEH itself bounced on Friday! We’ll have to wait and see how investors react to LEH‘s earnings tomorrow, and that of GS on Tuesday. If XLF continues to rebound, we need to see it above $24.5, which was the support back in March and should now be a resistance.

USO (oil)
After that tremendous spike a week ago, USO has been sliding lower. Its daily MAs are still in their bullish formation, but, the MACD appears to be heading lower. We need to see USO below $102.5 for it to draw $110 as the near-term top.

XME (metals and mining)
Through all the recent volatility, XME still looks strong. Coals seem to continue to make new highs. Steel plays have also kept things up. XME closed above its daily MAs on Friday and could be setting up for a breakout in the new week.

DBA/MOO (agricultural commodities/agriculture)
Shares in the agricultural sector have been very strong!

DBA has been bouncing for almost 2 weeks now. Its MACD is climing higher, while the daily MAs have just formed a new bullish phase.

Although MOO itself has not been particularly strong, some if its componets have been making new all-time highs. MOS and POT have been among the leaders in this group. CF is looking to break out. MOO‘s daily chart is still holding a bullish formation. Above $64 is a breakout, so, there may be room to look for laggers in the agriculture sector.

Hope all the fathers out there enjoyed a wonderful Father’s Day Weekend!
Good night and HappyTrading! ™

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