This past week the S&P 500 Index lost another 48.00 points making this correction four weeks in length. Even though this was a sharp weekly decline the broad based index did stage a sharp reversal day into the close of options expiration on Friday May 21, 2010. At this time the weekly 50 moving average has held as support for the index. This important moving average was tested during flash crash on May 6th, 2010 and then again tested last week as the index declined. There is a fair chance of a short term bounce in the market as the weekly 50 moving average and the February lows are still strong support. However, the weekly chart is now pointing down and any close below that level could signal further declines. The weekly support levels for the S&P 500 are $1050.00 and $1025.00. Traders who would like to trade the S&P can utilize the SPDR S&P 500 ETF (NYSE:SPY).
The SPDR Gold Trust (ETF) (NYSE:GLD) declined sharply this past week as everything including gold was dragged down into a deflationary tailspin. The GLD lost 5.15 points for the week closing at $115.22. Last week we mentioned that the high volume spike in gold could lead to a pullback and that turned out to exactly be the case. While gold remains in a technical uptrend it is not uncommon for the precious metal to correct and consolidate before trading higher. Gold is usually owned by many investors during times of fear and during times of inflation. It is also viewed by many as the worlds reserve currency since the beginning of recorded history. Should the major market indexes all fall apart and decline due to massive deflation it is likely that gold will decline as well. Should this scenario ever happen it is still likely that gold will hold up better than everything else. The weekly GLD support levels are $113.00 and $110.00.
The United States Oil Fund (NYSE:USO) finished the week lower by $2.54 to close at $32.27. Last week we mentioned that if the $34.00 level failed to hold as support the $31.60 area would be the next important support level. The low last week was $31.64 and a small bounce came into the USO at the close of the week. The short term weekly trend for the USO is now down and price is trading below the weekly 20 and 50 moving averages. While it is possible for bounce to occur here until the USO recaptures the weekly 20 and 50 moving averages it remains in a weak and vulnerable technical position. The next weekly support levels for the USO are $30.00 and $27.00.
What a week for the U.S. Dollar Index! The dollar made a new high for the year before reversing sharply after hitting weekly resistance at the $87.00 – $87.50 level. Note the chart of the PowerShares DB US Dollar Index Bullish (NYSE:UUP). The pattern on the weekly U.S. Dollar chart is now a nice reversal topping tail which could lead to further declines in the dollar. Recently the U.S. Dollar and the Euro have traded in an inverse lockstep relationship to each other. At this time when the Euro currency bounces many traders believe it is a sign that the European Union is stabilizing. While this may be true in the short term the dollar could still trade higher after a pullback or correction. The weekly support levels for the U.S. Dollar index are $84.00 and $82.00. The weekly resistance levels for the dollar are $88.00, $89.00, and $90.00. If you followed us through either the Research Center or Intra Day Stock Chat then you know how accurately we nailed the moves in both the Euro utilizing the FXE and Dollar last week, along with many other big moves such as JPMorgan Chase & Co. (NYSE:JPM), Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), and Trina Solar Limited (ADR) (NYSE:TSL) all earning huge profits.
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