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Market Forecast + Sector Watch: SPX, Nasdaq, XLF, XME, XLE, INX2

|Includes: AIG, AMZN, APA, BAC, BKNG, CVX, EBAY, FCX, GOOG, GS, HIG, JPM, OXY, PRU, WFT, XLE, Financial Select Sector SPDR ETF (XLF), XME, XOM

Last weekend, in my Market Forecast, I wrote:

"For the new week, after trying hard, but unsuccessfully, to break away from the recent resistance levels (SPX 1000; Nasdaq 2000), the market technicals are showing slight weakness.  The MACD on both SPX and Nasdaq have turned lower.  Nasdaq closed below its 10-day MA.  SPX closed right at its 10-day MA.  The market may need to get a quick drop for the major indices to test the 20-day MA.  Again, the relationship between the dollar and the commodity sectors will be among the top factors.  Next week is also options expiration week.  So, be ware of expiration manuevers."

Again, things happened exactly as forecasted above.  On Monday, the market took a "quick drop" to visit the 20-day MA.  The dollar jumped and the commodity sectors led the market down.  But, since we wisely went to cash the week before, it really didn't harm us.  Instead, it gave us a chance to play the downside.  On Tuesday, the market saw some buyers coming back.  The dollar started to fade again.  On Wednesday, the market started weak, gapping lower.  It gave us a chance to cash in on our downside plays, including our FSLR puts.  The market soon reversed and we hopped on the long side again, giving us winning trades on both sides!  On Thursday, the market continued to rally on.  Commodity sectors rallied hard on Friday and pushed the market to a new 2009 high, helping us wrap up another good week!  We waited patiently for the market to show clearer directions and were rewarded (see my article on "Learning When NOT To Trade").  As cautioned on expiration manuevers, the market ended completely differently than how it started, which made some expiring August options very profittable!!

For the week, the Dow was up +184.56 points; SPX added +22.04 points; Nasdaq gained +35.38 points.  Both gold and oil closed higher; the dollar dropped.  At the time of this writing, Asian markets are heading higher.  Let's see where the market stands after Friday's close:

SPX (click to enlarge)

On Friday, SPX jumped +18.76 points to close at 1026.13, above its daily upper BB.  Its daily MAs and MACD curved higher.

Nasdaq (click to enlarge)

Nasdaq gained +31.68 points to close at 2020.9, above the 2000 level.  Its daily MAs and MACD turned up.

The market certainly closed the week on a strong note.  After two weeks of testing the upper end of the recent trading range, the market did a quick drop and was able to close just above that trading range.  SPX tested its 20-day MA, while Nasdaq tested the 30-day MA.  Both indices closed at a new height since October 2008.  For the new week...

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