Following Friday's "cracked berry" in large cap tech, will three days and 3.60% prove to be the pause that freshens for Mr. Market? For the five day period the SP-500 (SPY) is off 2.13% as money managers perform a long overdue chase in that other sometimes feared direction.

THE WEEKLY NUTSHELL

• "Monday Mourning" saved by the green shoots crowd. Light news and Dollar (UUP) strength find bulls schnitzeling a little out the gate from a technically-extended market. Commodity complex led by Black Gold (USO) lead bulls lower. Lennar (LEN) sees profit-taking following miss but optimistic conference call. Dell (DELL) delivers token Merger Monday headlines with $3.9B premium deal for Perot (PER).
• "Not-So-Simple Two Day Pullback" receives confirmation Tuesday as bulls notch fractional gainer. Asia Development Bank sees stronger growth for Asia and tied at-the-hip weakness in the Greenback inspire bulls to bid equities spearheaded by commodities-based green shoots efforts. Upgrade for US Steel (X) to "Neutral" from BofA aids relief bid with 4.62% gain. Lowes (LOW) weighs in on the bull with company of future charges.
• Wednesday humper as bulls get "All Fed Up" with latest FOMC decision. For the intraday bulls, General Mills (GIS) serves up sugar-coated bull into FY10, Xilinx (XLNX) issues upside guidance and Ford (F) benefits from its upbeat comments on auto industry. For the bears, weekly oil data sends USO tumbling on demand concerns. Fed message of economic conditions not warranting exceptionally low fed funds rate levels for an extended period shocks bulls into a "sell-e-bration" (after celebrating) and laying the groundwork for a double top in the SP-500.
• "Terribull Thursday" as bulls suffer second straight loss and confirmation for technical top. Out-the-gate cheers courtesy of better but still very weak claims data [530K, 6.13M] get deconstructed by weaker and disappointing existing home sales. Dollar strength off year-to-date lows helps drill USO below technical supports and increasing demand / economic worries.
• A "Cracked Berry" from RIM's (RIMM) reduced guidance, surprise drop in durable goods and soft new home sales showcase a third session of profit-taking for bulls. Hewlett (HPQ) reaffirms in-line forecast in effort to appease business spending concerns.

ON TAP THIS WEEK

In corporate confessionals, it's another light calendar with officially-slated earnings reports taking a possible backseat to preannouncements which might elicit either cheers or jeers. Last week semiconductor outfit Xilinx (XLNX) found investors doing a bit of the former on its improved guidance. On the other hand, building supplies retailer Lowes (LOW) saw the latter with its 4.00% deconstruction of shares through the 50-Day confidence line.

Taking center stage for earnings releases on tap, Tuesday night and potentially tone-setting for Wednesday's session, athletics goods goliath Nike (NKE) is expected to deliver profits of $0.97 per share versus last year's $1.03.

Technically and for the bulls, shares of NKE have been carving out a four-month long and 20% deep base consolidation off year-to-date highs and after breaking above a weekly downtrend line. More recent, for nearly two months shares have contracted into a range of about 10%. The last several sessions have found the stock breaking higher above lateral resistance and forming a potential handle within the larger base.

On the economic docket, traders have a bevy of reports with which to possibly confirm the stateside "jobless recovery." The week's second half will have private job losses courtesy of the ADP, the latest count of Americans standing in the benefits line on Thursday and capped off with the closely-watched monthly unemployment and axe-to-payrolls bean counting by the government. Separately and in the area of road-to- potential-recovery, national manufacturing looks to improve upon last month's expansion reading of 52.9 with an estimated uptick to 54.0.

Also on tap, investors have the Case Shiller price index and pending home sales data to digest. The reports should continue to deliver evidence of a mostly improving but still weak housing market. Trader talk of the government's $8K incentive program ending in the next couple weeks and whether a second round is in the offing, may gain some traction as well.

Finally, the state of the Greenback (UUP), which may be putting together a technical year-to-date bottom, treasuries (TLT) poised for upside on the daily, weekly and monthly and a price drilling in Black Gold (USO) below lateral supports of the past two months will be on traders' radars. It's likely those intertwined markets will offer leading clues as to the broader averages own price direction. To which and coupled with the "Technical Picture" discussed below, "red chutes" further removed from money managers chasing the Jones' into the end of the quarter appear likely.

Weekly Calendar of Key Reports
Monday:
Economic
Earnings NA
Tuesday:
Economic Case Shiller HPI (-14.20%), Consumer Confidence (57.0)
Earnings Pepsi Bottling (PBG), Potlatch (PCH), Walgreen (WAG), Darden (DRI), Jabil (JBL), Nike (NKE), Sealy (ZZ), Worthington (WOR)
Wednesday:
Economic Weekly Crude, ADP Employment (-200K), GDP Q2 Final (-1.2%)
Earnings Actuant (ATU), Diamond (DMND), Lawson (LWSN), Xyratex (XRTX)
Thursday:
Economic Weekly Claims (535K, 6.17M), Inc & Spend (0.1%, 1.1%), Pending Homes (1.0%), Construction (-0.2%), ISM (54.0), Auto & Truck
Earnings Accenture (ACN), Global Payment (GPN), Immucor (BLUD), Micron (MU), Resources Connect (RECN)
Friday:
Economic Monthly Jobs Report (-180K, 9.8%), Factory Orders (0.5%)
Earnings NA

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Daily Chart

Is three times the charm? Three days of profit-taking from a well-defined "micro" double top with its ominous overbought RSI reading have produced a correction of 3.60% in the SP-500. Looking above at recent past and similar incidents of too much bull getting nipped in the technical bud and the case could be made for a low within the uptrend to emerge. There's even a nice little doji low to suggest "Buy, Buy, Buy!" after the "Sell, Sell, Sell!"

On the other hand and discussed ad nauseam over the past couple weeks, aligned technical stars of seasonal weakness and historic gains of 62% further suggest the "bare bones" price correction isn't deep enough within the existing trend to support intermediate purchases with reduced risk and improved odds for a lasting turn to the upside and fresh highs in the market.

Entering the week, the observation from this strategist remains focused on seeing a corrective test of 97 - 101.50 before the bigger picture might set up for slower money bulls. Admittedly, potential support is loose with a width of about 5%. In appreciating an uptick in an already volatile market and some long overdue testing of Fibonacci, Bollinger, the 50-Day MA and neckline-it also seems wholly justified.

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 3.60%, 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).

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.