The Dow Jones Industrial also had big week as it closed up 7%. We saw a similar profit taking on Thursday and Friday; however the first thing investors need to remember, especially in these market conditions, is to take profits. What is interesting is that the buying momentum during the week helped push prices above the 50-day and 200-day moving average. This could create a bit more momentum for the Dow and push prices above the next resistance area of 12,200; however investors should use some caution if the price does hit those levels.

Most of the volatility in equities was seen in the tech sector as the NASDAQ Composite closed the week up 7.59%. On Monday the index gapped significantly higher but then sold off modestly on Tuesday. Once again prices gapped on Wednesday and traders used a gap on Friday to exit their position. In the near-term the 200-day moving average, which is hovering around 2,670 could act as resistance in the near-ter. Because of its volatility the Composite index could swing in a fairly wide range with ultimate resistance at 2,700 and support at 2,500.

Because of the strong market sentiment, oil prices managed to push above $100 a barrel, which is something we were expecting.  On Monday prices managed to push above that strong psychological barrier; however the rally didn’t last long as traders were quick to take their profits and drove prices lower. The long prices consolidate around $100 the more powerful the breakout will be when prices push past recent highs at $103.37.

In the last week’s report we pointed out that gold prices were consolidating, and with the renewed market sentiment, investors should have been prepared to see some buying momentum. On Monday gold pushed passed its 50-day moving average, on decent volume, which added to the momentum. Friday ended with some modest profit taking. We could see prices test support at 1,725. On the top side, prices could test resistance at 1,800.

The 80.00 area continues to act as resistance as positive market sentiment caused a modest selloff in U.S. Despite the sell-off during the week, U.S. dollar futures managed to hold support around 78.00. With equity markets expected to be choppy during the short-term, we could see the U.S. dollar swing within a fairly wide range with initial resistance at 79.50 and support at 78.00. If market sentiment continues to improve then we could see prices drop to a low around 77.00.

With the selloff in the U.S. dollar and the rally in equities, it is not surprising that euro futures managed to find support just above 1.32. Investors need to be aware that the problems in Europe won’t be solved over night, which means that we are not expecting to see the euro explode higher in the near-term. If markets to continue to improve prices could break through initial resistance at 1.36 and eventually test resistance at 1.38.

Note: The 5 x 5 is set to be released 1^st wk of Jan 2010.
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