MARKET ANALYSIS
Since our last report bulls have schnitzeled a little, but given the backdrop and newly-formed double top-"red chutes" look to enter the mix. For the three day period the SP-500 (SPY) is off a still relatively tame 1.35% as September chills finally begin to be felt by investors.
Key highlights for buying a little something during the three day period:
- Institutions purported need 'to chase' and keep up with Jones' for end of quarter per CNBC.
- Asia Development Bank sees stronger growth for Asia on Tuesday.
- Upgrade to "Neutral" for BofA (BAC) by influential R. Bove.
- General Mills (GIS), Xilinx (XLNX) and Ford (F) serve up sugar-coated outlooks good for driving bulls forward.
Key highlights for schnitzeling a little something into and off the double top:
- US Dollar (UUP) reversing course from year-to-date lows has bulls drilling Black Gold (USO) below supports in two day and 8.14% "Monbacky.
- "FOMC's surprise message of economic conditions not warranting exceptionally low fed funds rate levels for an extended period.
- Disappointing and weak existing home sales prompt Thursday's confirmation of technical top SP-500.
- G-20 and UN pow-wows this week don't provide any additional green shoots nuggets for bulls.
- See "Market Snapshot" below.
Market Snapshot
Figure 1: S&P500 (SPY) Daily Top
Futures are pointing lower in Friday's premarket with many bulls pointing fingers at RIM (RIMM) following slightly weak guidance last night and a worse-than-expected durable goods release this morning. The observation from this strategist is one need to look no further than the daily chart above and its overbought RSI 14 double top.
I suppose, traders could also zoom out to March to better get a feel for the market's gravity-defying 62% gains. In doing so and with help from the bulleted points below which emphasize a more cautious-to-bearish stance, traders might better appreciate the bare bones corrective action of 3.20% in the SP-500 isn't a pullback or "Monbacky!" worthy of great technical support or a type of play that's exactly fresh and untried.
Bottom-line, trends do end and sometimes very abruptly at that, to which this market's current situation looks ripe to put into fruition. For bulls aching to "buy the dip" a somewhat wide estimated support zone from 97 - 102 looks worthy of waiting on. For those that can't wait to "Buy, Buy, Buy!!", I'd suggest, the use of selling upside premium in the form of verticals, modified fly's or ratio front-spreads for the more advanced and (perceived) risk tolerant.
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
- Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
- Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
Bearish Technicals
- 1930 Bear Market Rally repeat and "W" pattern SPY?
- Weak calendar months of September and October.
- Consistent weekly breakouts suspect.
- Bollinger Double Top and O/B RSI 14 SPY.
- Bollinger and YTD test in VIX.
- Third time the charm? Potential W5 Daily and W4 Weekly in SPY.
- SP-500 > 20% above 200-Day MA.
- "Sidelined money" chatter running heavy.
- SP-500 slips 3.20%, barely scratching 2% - 10% "healthy" corrective activity.
- Estimated 97 - 100 corrective test given toothy technicals of bull.
- Technically-extended market leaders (GE, AAPL and GS).
RADAR WATCH
Last report's gospel seems deserved of a rehash. Bases in stocks already having done the technical work of lengthy hemming and hawing might be considered attractive and worthy of bucking a market "still" due for additional corrective work. But and as described above, the selling premium when priced right is also determined to more than appropriate as headway could prove difficult-just ask the bulls in the very recently posted Bulls Radar component NutriSystem (NTRI).
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
Company | Symbol | Sector | Earn. | Tracked | Pattern |
NutriSyst' | (NTRI) | Weight Mgt | 10-28 | 9-21 | B/O Weekly |
Table 1: Bull Watch list
Non-Directional
Company | Symbol | Sector | Earn. | Tracked | Strategy |
NA | NA | NA | NA | NA | NA |
Table 2: Basing Watch list
The Bears
Company | Symbol | Sector | Earn. | Tracked | Pattern |
Sears | (SHLD) | Retail | 12-2 | 8-31 | Bear Flag |
SP-500 | (SPY) | Mr. Market | NA | 9-17 | OB Corrective |
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.
