Wang’s Happy Trading

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Hope you’ve all had a wonderful and fullfilling Thanksgiving dinner with your friends and family!

The market finished November with a strong bounce, although it still recorded a loss for the month. During the last week of November, the market was able to make continuous gains. For the week, the Dow finished up +782.62 points; SPX added +96.21 points; Nasdaq gained +151.22 points.

Last weekend, I wrote:

“For the new week, the latest support levels will be very crucial. If the market cannot hold SPX 750 and Nasdaq 1300, it could fall a lot lower. The market jumped quite far in just one hour and may need sometime to let off steam. So, Monday morning could be a volatile one. Then, we’ll have to see if the market can get another wave of buying in the afternoon. The daily MAs are still pointing down, although the MACD could be turning. The overall picture is still bearish, and could easily continue the downward trend.”

On Monday, the market jumped on the bailout of Citigroup (C), and has not looked back! SPX 750 and Nasdaq 1300 have not even been revisited since the turn-around on Friday, Nov 21st. The daily MAs on the market major indices are flattening out, and the MACDs have turned up with bullish crossovers. We traded carefully on the bullish side this week and locked in some good profits. Let’s see how the market looks after a big week:

SPX

SPX added +8.56 points to close at 896.24. It closed at the 30-day MA, and just below the 900 level. The MACD went higher.

Nasdaq

Nasdaq gained +3.47 points to close at 1535.57. It closed just under its 20-day MA. The MACD was up.

The market was surprisingly strong last week. We also saw a strong rally at the end of October leading up to the presidential election. That rally quickly faded after the election and the market set new lows thereafter. The market seems to be testing the 30-day MA again (The Dow, not shown here, actually closed above the 30-day MA last week.) There are some differences this time:

1) The financials are leading the rally this time. GS has gained more than +50% from its low of $47.41. During the October rally, GS actually traded lower.
2) The market seems to be so oversold that the bad news are being ignored and the market jumps on any good news.
3) The 30-day MA on the major market indices is finally flattening. In October, it was still sloping lower.
4) New bullish crossovers have just been established in the MACDs.

On the other hand, the market does seem like it needs a rest. It has rallied for 5 straight sessions. This weekend, we saw encouraging, early data on the holiday shopping. A lot of attention is still on the automakers to come up with a sound business plan to receive the $25 billion “bridge loan” from the government. So, for the new week, we’ll be looking to see how the market deals with the 30-day MA this time. VIX has calmed down considerable from 80 to 55. But, the 55 level was tested on Friday and VIX managed to close above. The intraday charts on VIX have also been showing bottoms. We’ll need to see if the market can find strength to go higher after letting off some steam.

Sector Watch

UUP (dollar)

UUP dropped lower this week. It bounced back after testing $26 and still managed to close above its 30-day MA.

USO (oil)

USO came close to testing $45, but, could not break through. It once again closed below its daily MAs. This weekend, the OPEC meeting ended abruptly without new output cuts. This could put more pressure on oil prices.

GLD (gold)

GLD managed to close above $80. A new bullish formation is showing on its daily chart. Its daily MAs have all turned up. It looks like GLD is ready to go higher.

SKF (financial ultrashort)

SKF has tumbled from above $300 to now $135. It closed below its daily MAs and is showing a new bearish crossover in its MACD. If it does not pop back above $140, $120 level is the nearest support.

SOXX (semiconductors)

SOXX finally managed to close above the 10-day MA and established a new bullish crossover in its MACD. Techs have been relatively weak in this rally and will need the semicondutor sector to participate. I’ll be keeping an eye on the SOXX to gauge the health of this rally.