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Market Bounces Back After Testing Support

|Includes: Apache Corporation (APA), BHP, BP, BTU, CLF, DO, DVN, EOG, FCX, GLD, IOC, OXY, RIG

As discussed in my Market Forecast this weekend, I was looking for more selling pressure to test SPX 1040.  The market was weak in the morning and sank as low as SPX 1042.17.  Techs were especially weak today.  However, the miners drew some buyers back in and stayed strong most of the day:  CLF +4.42%, BTU +4.02%, FCX +4.81%, BHP +5.42%.  After coming near to SPX 1040, the market started to bounce, and the miners led the way.  Energy stocks also showed strength:  APA +3.32%, DVN +3.06%, OXY +2.21%, EOG +4.17%, IOC +4.44%.

Gold was strong earlier during the day and set a new all-time high going above $1250/ounce.  Gold miners rallied in the morning as well.  We took profits on our GLD calls with profits as high as +105%:

June 08, 2010
07:12 | HappyTrading GLD ($122.12) Sold to Close 06C118 Jun 118 calls, at $4.60 +105%

We also took a small loss on a quick day trade when the market started to bounce.  These RIG 45 puts traded as high as $3.4 and closed at $1.99.  We'll look for possible re-entry on these puts if the market gets weak again:

June 08, 2010
11:55 | HappyTrading RIG ($46.00) Sold to Close 06P45 Jun 45 put, at $2.20 -24%
07:16 | HappyTrading RIG ($44.90) Bought to Open 06P45 Jun 45 put, at $2.90

The Dow ended the day up +123.49 points; SPX added +11.53 points; Nasdaq, which was down almost 35 points, came back to close down just 3.33 points:

XME (metals and mining) led the market with a +2.28% gain.  XLF (financials) managed to come back, up +2.09%.  USO (oil) bounced as well.  XLE (energy) added +1.66%.  Even OIH (oil services) managed to close in the green.  FXI (Chinese ADRs) climbed +2.16%.


SPX added +11.53 points to close at 1062, above the 1060 level.  The MACD flattened.


Nasdaq slid 3.33 points to close at 2170.57.  MACD was slightly lower.

This bounce today could shift the momentum to the upside for the next few days.  The market tested the support and saw buyers rush in to perhaps "bottom fish".  The key lies in the commodity sectors, which have been beaten down quite a bit.  If the mining and energy stocks can rally, the market has a good chance to see some upsides.  However, oil services remain weak.  BP, RIG, and DO all recorded new 52-week lows today.  All 3 stocks remain very bearish.  Gold actually ended in the red after recording a new all-time high.  GLD still looks strong and will need to clear $122 to have a new breakout. 

Some trading ideas:
Upside trades:
If the market does see follow-throughs on today's bounce, energy and miners have a lot of room to go higher.

Downside trades:
If the market slides again, the weakest sector is still the oil services, especially BP, RIG, and DO.

Good night and HappyTrading! ™

Disclosure: no positions