MARKET ANALYSIS

Bulls celebrate corrective testing of "SP-1000" with a late day rally, but will they "sell-e-brate" Friday's key jobs data? For the three-day period, the S&P500 (SPY) is off 1.77% and likely frustrating to bulls and bears alike, all things considered.

Key highlights for schnitzeling a little for the three day period:

• Technical downside follow-through on "profit-taking" Tuesday.
• Corrective move in Asian markets including "red chutes" China / Shanghai.
• Still non-laboring jobs data courtesy of ADP and weekly claims. Weak factory orders and mostly poor same-store sales comps.
• FOMC Minutes message of concern over job market and disagreement regarding low inflation.
• Flight-to-safety type jump in Gold (GLD) and treasuries (TLT).

Key highlights for buying the latest pullback:

• ISM expansion and surprise strength from pending homes sales.
• "SP-1000", near 30!! VIX and "Worst Decline Since May!" fodder for bulls.
• Stateside bulls embrace "Shanghai Surprise" rally and OECD report global recession is concluding earlier than expected.
• Bid in retail (COST, KSS and WMT) despite mostly weak reports keeps market bid.
• Late Thursday "fearful" rush (or squeeze) to buy in front of discounted jobs data?

Market Snapshot


Figure 1: S&P500 (SPY) Weekly Inverse H & S or 50% "W"

Last time we wrote of the expectation for a larger and minimum corrective move of 5% to 10% remaining in our sights. Does the 4.23% received cut it? Well, not quite despite being good enough for government workers and often enough, traders too.

The percentage decline is officially of the corrective-price schnitzel category [3% - 10%] within a healthy bull market. However, in this strategist's eyes, "SP-1000!" with some hard wiggling room around the psychological support over the last three days-still falls short of what's viewed as a "minimum" requirement at this juncture.

The reasons behind seeming potentially stubborn or bearish are due to all those existing and well-covered background concerns. Most recently, this morning some of that uneasiness was detailed in Hot Shots: SPY'ing a Top. I won't bother reiterating, but the gist of the material can be found in the bulleted points below.

Maybe myself, the turn-on-a dime Fast Money crowd and Cramer's more worried alter ego at TheStreet.com (versus Mad "all smiles" Money) will be proved wrong and the market moves higher from here. There's always the possibility the proverbial bid beneath the market hasn't gotten enough of those green shoots yet. I just won't be participating as a bull in anything resembling the technical picture of the SPY.

Lastly, if for some reason bulls feel fit to celebrate Labor Day in a spirited manner because of Friday's jobs report-leaving that kind of "work" up to the other guy is something I don't mind doing.

The following factors and anecdotal evidence might be considered relevant in determining a suitable, limited-risk strategy in the coming days and weeks ahead.

MARKET LAB
Bullish Technicals

• Historic corrective low.
• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Above the 50 and 200-Day MAs SPY.
• Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
• SPY 98 - 100 first corrective support zone of notice gets tested.
• Pre-holiday and "first of month" monies tendency to keep bulls smiling?

Bearish Technicals

• US "Jobless Recovery!" green shoots versus China's "red chutes" of late.
• Potential W5 Daily and W4 Weekly in SPY.
• 1930 Bear Market Rally repeat and "W" pattern SPY?
• "W" midpoint doji weekly confirmation.
• Weak calendar months of September and October.
• Larger minimum correction zone of 94 - 96 given historic magnitude of rally.
• Corrective lows reached in SPY fail to signal VIX Stretch condition.
• Consistent weekly breakouts suspect.

RADAR WATCH

IBM (IBM) is being gracefully removed from the Bulls Radar after failing to make good on its 4-week flat base breakout. Growth strategists content to use money management based on a stock stop loss of 7% to 8% are still in the game.

For readers interested in additional strategy, I suggest heading over to Investors.com this evening and browse the option section. My daily column discusses an October call position, stop management, as well as potential repair strategies in a series of articles to be finished tomorrow evening.

RADAR SCREEN
The following optionable stocks look to have a combination of technicals and fundamentals that might warrant further investigation based on a trader's own methodology and risk acceptance. The list is not a recommendation and is intended for educational purposes only.

The Bulls

Table 1: Bull Watch list

Non-Directional

Table 2: Basing Watch list

The Bears

Table 3: Bear Watch list

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.