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Weekly Wrap + Market Forecast + Sector Watch: SPX, Nasdaq, USO, INX2, XME, XLF

Jan. 23, 2011 11:23 PM ETUSO, XME, XLF, AMZN, NFLX, STLD, AKS, BTU, X, AXP, BLK, HAL
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Earnings reports were the driving forces behind the market movements last week.  Although Nasdaq gave up some grounds, as FFIV missed its earnings estimates, SPX and the Dow hardly budged.  In fact, the Dow had a winning week!  Thanks to IBM and GE!  We traded on both sides and had some pretty good results.  Here were the closed trades (click HERE to find out more about our published trades):

09:24 | HappyTrading X ($53.30) Sold to Close 02P55 Feb 55 put, at $4.00 +8%
09:05 | HappyTrading BTU ($58.40) Sold to Close 01P60 Jan 60 put, at $1.71 +84%
08:56 | HappyTrading NFLX ($182.00) Sold to Close 01P185 Jan 185 put, at $4.00 +21%
08:10 | HappyTrading NFLX ($183.70) Sold to Close 01P185 Jan 185 put, at $2.86 +51%
07:26 | HappyTrading AGU ($93.00) Sold to Close 01C90 Jan 90 calls, at $3.25 -7%
07:56 | HappyTrading AKAM ($52.25) Sold to Close 01C47 Jan 47 calls, at $5.30 +96%
07:45 | HappyTrading FAS ($30.95) Sold to Close 01C30 Jan 30 calls, at $1.45 +23%
07:42 | HappyTrading IBM ($150.40) Sold to Close 01C150 Jan 150 calls, at $2.22 +27%
07:33 | HappyTrading AAPL ($335.50) Sold to Close 01C350 Jan 350 calls, at $3.05 -38%

Last weekend, in my Market Forecast, I wrote:

"For the new week, we have lots and lots of earnings coming in.  On Tuesday morning, C will lead the financials off.  If C reports well, it should offset the AAPL news.  Most analysts are expecting AAPL to deliver a strong quarter in the afternoon; we'll just have to find out how much Steve Jobs matter this time around.  IBM also reports on Tuesday after the market.  Here are some notable earnings...


Although the market indices are technically toppy, strong earnings can still push things higher.  China's news may exert some pressure on the commodity sectors.  We'll have to see if techs and financials can come through with strong earnings.  The nearest resistance for SPX is now 1300.  Between 1260 and 1250 should find pretty strong support.  Techs look strong.  Semiconductors just broke out on Friday, although they may need a little breather in order to go up further."

Indeed, China's inflation concerns did put commodity sectors on the defensive.  Metals and energies were weak.  On Tuesday, the market managed to overlook C's earnings miss and pushed higher ahead of AAPL and IBM's reports.  After the market, AAPL delivered a blowout quarter, but, investors sold off after the earnings report, as uncertainties arose due to Steve Jobs' sick leave.  IBM pushed higher.  On Wednesday, selling in techs continued ahead of FFIV's earnings.  Fortunately, we took profits in our long positions on Tuesday.  Semiconductors also pulled back.  FFIV's report certainly didn't help.  The selling continued on Thursday, as we made some nice plays on the downside.  Friday was a volatile day, as it was options expiration day, and, some dip-buying added to the volatility.

For the week, the Dow was up +84.46 points; SPX slipped 9.89 points; Nasdaq fell 65.76 points.  Both gold and oil went lower.  At the time of this writing Asian markets were mixed, but, little changed.  Let's see how the US market looked after Friday's close:


SPX added +3.09 points to close at 1283.35.  It closed above the 10-day MA.  The MACD slid.


Nasdaq lost 14.75 points to close at 2689.54.  It fell below the 20-day MA.  Its MACD also went down.

Nasdaq came down quickly from reaching above 2750 last Tuesday.  SPX still hung above 1280.  VIX popped up last week and closed above 18.  For the new week...

To read the rest of this article, please subscribe to HappyTrading "Premium Articles" by going to the Premium Services (click here) page.  If you are already a subscriber, please click here: Market Forecast 1/23/11.

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