Last weekend, in my Market Forecast, I wrote:
"For the new week, how the market does on Monday will be very important. On Sunday, Euro partners agreed to a $145 billion bailout plan for Greece. We'll have to see how the market reacts to that piece of news. But, there are potentially more negative news to weigh on the market. Financial reform and the case(s) against Goldman Sachs are bound to have new developments. Australia's new mining tax could pressure the mining sector. In addition, the oil spill disaster off the Gulf Coast will likely continue to haunt the oil services industry. Thus, upside moves could be limited. The market will have to fight its way back above the daily MAs and test the recent highs before going higher. The market is already toppy. On the downside, once the market breaks below the 30-day MA, the bearish sentiment could grow."
Indeed, the market tried to rally on Monday, but the upside was limited. It could not close above the 10-day MA! On Tuesday, the market took a sharp dive, spooked again by problems in Europe. Both SPX and Nasdaq closed below their respective 30-day MAs and the sentiment turned bearish. On Wednesday, the market traded slightly lower, trying to digest Tuesday's sharp fall. On Thursday, the fall continued and the downward momentum built up. At one point, the Dow took a 600-point drop in just 15 minutes before bouncing back. We cashed in on our plays on the shortside. On Friday, the market slumped even more. We had been long on gold and short on the market. So, it was a very profittable week for our trades.
For the week, the Dow was down 628.18 points; SPX lost 75.81 points; Nasdaq stumbled 195.55 points. Gold rose to above $1200/ounce. On the other hand, oil fell to a 3-month low. At the time of this writing, Asian markets were mixed. It seems like some market were trying to bounce, but, the buying was limited. China continued to slip, down more than 1%. Let's see how the US market looks after Friday's close:
SPX
On Friday, SPX lost 17.27 points to close at 1110.88, just above the 110 level. The MACD and daily MAs all went lower.
Nasdaq
Nasdaq fell 54 points to close at 2265.64. Its MACD and daily MACD curved down.
With the sharp drops last week, VIX has risen back above 40! Both SPX and Nasdaq have already fallen below January's highs. Tonight, the European Union and the International Monetary Fund pledged a massive nearly $1 trillion defense package for the embattled euro. IMF has put up nearly $40 billion to help bail out Greece and appease investors' fears of a spreading European debt crisis. In addition, the Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent. These combined international efforts perhaps further demonstrate just how serious the financial crisis is in Europe! For the new week...
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