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Weekly Wrap + Market Forecast: SPX, Nasdaq, XLF, USO, GLD, FXI, BTK

The market was volatile last week and ended flat. The Dow ended the week down 44.37 points; SPX added +2.55 points; Nasdaq gained just +0.43 points. Since the market was swinging from side to side very fast and was range-bound, we did not make too many trades.

However, once again, we ended with 100% GR$$N on our closed trades:
7/31/08
CNX ($75.5)
CNXTO, Aug 75 puts, at $4.5, +7.1%

PNC ($72.8)
PNCHU, Aug 67.5 calls, at $6, +25% (partially out)

BIDU ($347.3)
BPJHJ, Aug 350 calls, at $14, +40% (partially out)

We were a little too careful on our CNX put trade, which would have given us a double on Friday! Those CNX august puts ended at $8.3, bidding at $8.6!

The trades left open were:
FSLR ($284)
HJQHA, July 300 calls, at $6.3 (open)
Friday close: $4.3; unrealized gain/loss: -31.7%

QCOM ($54.7)
AAOHX, Aug 52.5 calls, at $3.25 (open, avg cost $4.28)
Friday close: $3.4; unrealized gain/loss: -20.5%

BIDU ($339)
BPJHJ, Aug 350 calls, at $10 (open, partially out)
Friday close: $9.59; unrealized gain/loss: -4.1%

PNC ($70)
PNCHU, Aug 67.5 calls, at $4.8 (open, partially out)
Friday close: $5.4 (bid price); unrealized gain/loss: +12.5%

Let’s take a look at the market to see where things stand after Friday’s session.

Market Forecast
SPX
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SPX added 7.07 points to close at 1260.31. It closed below its 30-day MA, but stayed above its 20-day MA. Its MACD went higher.

Nasdaq
nasdaq_8_1_08.jpg
Nasdaq lost 14.59 points to close at 2310.96, above the 2300 level. It also closed above its daily MAs. The MACD continued to go up.

The market is fighting to make this recovery stick. Nasdaq tested its daily upper BB last week and its 10-day MA has gone above the 30-day MA. The 20-day MA has turned up. SPX, on the other hand, is seeing the 10-day MA above the 20-day MA, but, was held under the 30-day MA. What the market needs now is a solid jump, a big GREEN day, to catch the daily upper BB to allow the market to continue higher. For the new week, we have the Fed meeting on Tuesday. I think the Fed will likely leave the rates unchanged. The financial markets are a bit too nervous right now for the Fed to make any changes. If the Fed leaves the rates unchanged, I think the market will likely rally. VIX closed above 22 last week and right at its 10-day MA. This makes Monday uncertain. I’d feel more comfortable if VIX goes under 22. So, I’ll be watching VIX carefully on Monday. The market is taking cues from the financial sector right now. So, XLF will also be a good indicator.

Sector Watch
XLF (financials)
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XLF closed last week above its daily MAs. Its 20-day MA has turned up and the 10-day MA has risen above the 30-day MA. Its daily upper BB has opened up, just waiting for a big jump to push higher. A couple of more “up” days would push the 20-day MA above the 30-day MA, which would create a new bullish formation. JPM, BAC, WFC have already established new bullish formations on their daily charts. PNC and BLK could be positioning to break higher.

USO (oil)
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USO ended last week with a slight bounce, closing above $100. It is, however, still under its 10-day MA. The immediate resistance is at $102.5. The daily chart shows a new bearish formation. A push back below $100 could send it to $95.

GLD (gold)
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GLD expericed another slide last week, ending below $90. $88 is its next support, if $90 does not hold. Its 20-day MA is curving down and the 10-day MA has gone below the 30-day MA. It is threatening to make a bearish formation. I think GLD could be range-bound between $87-$95 for now.

FXI (Chinese ADRs)
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FXI has just created a new bullish formation with the 10-day above 20-day above the 30-day MA. Olympics 2008 is about to start in China next week. It seems like buyers are beginning to flock towards these Chinese ADRs. Chinese Internet stocks have been getting stronger. SINA, SNDA, SOHU, and NTES are looking solid. CMED has also been creeping higher. CN, CHA, CHL could be interesting to keep a watch on as well.

BTK (biotechs)
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BTK has been just screaming and has made a new all-time high last week. Hard to believe in this market environment, but, it is true! On Thursday, with the help from IMCL, BTK almost touched 880! ACOR, CELG, OSIP look very strong.

There’s news of MT possibly talking with ANR about a takeover. This news/rumor comes after ANR had agreed to be purchased by CLF. This could inspire some buying in the metals and mining sector (XME), especially among the coals, which had been weak lately.

Hope you’ve had a great weekend!
Good night and HappyTrading! ™


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