SPX Closes Higher After Unemployment Report...

DJIA + 22.75 +0.22% SP500 + 6.06 +0.55% COMPQ + 21.21 +0.98% Russell 2000 + 14.01 +2.38% Exchange NYSE NASD Advancing 2,171 2,012 Declining 870 707 Oil $76.10 -0.36 Gold $1,172.20 -45.20 SOX 335.21 +6.77 VIX 21.25 -1.21 The VIX moved down and did confirm the move up in the SPX on Friday. The SOX moved up and did confirm the move up in the COMPQ. Strongest Sectors: XLF +1.88%...XLI +1.51%...XLY +0.66% Weakest Sectors: XLB -1.09%...XLE -0.73%...XLU -0.62% Five of nine sectors moved higher on Friday. Financials, Industrials, Consumer Discretionary and Technology were stronger than the SPX +0.55%. Sector Watch Up Trending: XLK, XLB, XLY, XLV, XLP, XLE, XLU, XLI Horizontal Breakout: XLF Sideways: Down Trending: Key Resistance Levels: 1,113 = November High 1,119 = December High 1,025 - 1,133 = 1,075 BO chart target - Sep 08 Low Key Support Levels 1,101 = October High 1,087 = Nov 10 Channel low 1,082 = Nov 9 S1 level 1,075 = 875 Breakout Chart Target 1,061 = Sep 16 S1 level 1,056 = Sep 25 R1 level 1,044 = October Horizontal Old Resistance The SPX closed at 1,105.98 after completing its fourth straight week in a narrow trading range between 1,085 support and 1,115 resistance. The SPX did reach a new 52-week intra-day high of 1,119.13 before closing at 1,105.98. This is the highest weekly close for the SPX since the week ending September 26, 2008. Relative strength reversed this week as the INDU which has been the strongest index over the past and the RUT which had been the weakest changed places. Weekly Gain RUT +4.43% COMPQ +2.61% SPX +1.32% INDU +0.76% Check out these charts: (click image to enlarge) We posted earlier in the week about the symmetrical triangles breakouts in both the SOX and RUT. The SOX which not only broke out of its symmetrical triangle this week also reached horizontal resistance and made a new high close on Friday. Most semiconductors closed higher on the week with MRVL up on earnings on Friday, LRCX breaking out of a symmetrical triangle and KLAC breaking through horizontal resistance this week. Check out these charts: (click image to enlarge)

Guidance: The SPX is still in a short term neutral trend near resistance. The big news is the slowing down of the large caps in the INDU and SPX and the flow of money back into the RUT and SOX since Tuesday. This is the rotation that we pointed out in Wednesday’s post. Financials, XLF, have been going sideways for three months, exactly the same time the upward momentum in the SPX has slowed. We continue to watch for strength in this sector as an important factor in the SPX breaking through its own horizontal resistance. Also with the big drop in gold prices on Friday there is a possible shift from gold stocks that could be setting up. If you are long in this area follow your exit rules when they are met. GLD and GDX gave short term exit signals with a break of the low of the high day. Friday’s rise in the dollar and drop in the Euro is technically too early to call a change in trend. “One day does not a trend make.” However, it seems the large price fluctuation was motivated by trader’s concern that the Fed might raise rates. So it is a speculative move. Since the next Fed meeting is December 15 -16, it seems that price will move back in the direction of trend. Also the good employment news on Friday may still be too little good news to convince the Fed to begin raising rates. Some are confused by the fact that the SPX rose while the Euro fell and the dollar rose. This is in part because they confuse correlation, (which is not 100% even when the SPX and Euro are in sync as I have pointed out previously), and causation. They are not one in the same. If fact I have pointed out from the past that some times the SPX and Euro are inversely correlated. While it is too early to go into detail, there will likely be a time in the relatively near future when the Fed does begin to raise rates…this could still be up to 6 months away…that you will likely see the SPX rise and the Euro fall, meaning a shift back to inverse correlation. So don’t fall into the trap of listening to those who have not thoroughly researched back correlation and have fallen into the trap of a recency bias.

I hope you began to shift some attention to the semiconductors and small caps as we alerted you on Wednesday. Continue to focus on and trade setups on the charts of the stocks you watch and follow your rules. AAPL -3.16 QCOM +0.53 GOOG -0.73 BIDU -2.57 NDX 100 stocks stronger than the NDX include: MRVL, AKAM, ADSK, NTAP, LBTYA, KLAC, NVDA, SPLS, FAST, INTC, NWSA, NIHD, DISH, CTXS, DTV, DTAS, SBUX, WYNN, STX, AMAT, CHKP, URBN, PAYX, RYAAY, EXPD, SRCL, JBHT, BIIB, CA, BRCM, FLIR, FISV, JNPR, INTU, PDCO, CERN, ADBE, CSCO, CMCSA, PPDI, QCOM, FSLR, ADP, ISRG, GRMN and LRCX. Stocks to Watch on Monday Leading Stocks Holding Above 30 DMA K, JW.A, AMZN, SLGN, MCD, DLB, RCI, ESRX, MHS, WCG, ALGT, BDX, VAR, ACN, CTSH, HLF, AFAM, AMX, GR, SNHY, SYNA, WMT, GILD, HDB, ORCL, WAB, BIDU, EZPW, PCLN, GXDX, PCP, MON, MOS, TDG, X, BIIB, NTLS, AMX, PETS, NIHD, VPRT, PSYS, EBAY, URE, BLUD, DECK, GES, GPRO, USD, WRC, BAP, BKC, CBST, SNA, FSLR Moving Above 30 DMA = 7 BYI, CLB, CPLA, JCOM, WAB, FAS, UYG Moving Below 30 DMA = 3 MYGN, NFLX, FAZ Staying Below 30 DMA DLTR, ICE, JOSB, JOYG, PWRD, AAPL, GME, CHL, FLS, DV, RBN, SLGN, ATW, CAM, PPD, JEC, GMCR, MUR, RIMM, SWN, HANS, STRA, TRLG, AMED, APEI, PWR, SPWRA, ESI, FUQI Intermediate Term Market Trend: Up Short Term Market Trend: Neutral