MARKET ANALYSIS

A less confident and crowded position has bulls blaming the dollar and a downgrade in the semis for a less-than-thankful Thursday. For the three-day period, the SP-500 (SPY) is off 1.25% and gnawing at bulls heartstrings below 1100.
Key highlights for some "Buy, Buy, Buy!" above and below SP-1100:

• Tuesday / Wednesday hold of closely-watched 1100 level in SP-500.
• Risk averse carry trade continues in its crowd(ed) pleasing abilities Wednesday.
• Decent data includes Philly beat and M-O-M rise, OECD's GDP boost to 2.50% for 2010 and weak PPI data.
• Soros noshes on green shoots of Potash (POT) with 1.0M share stake increase.

Key highlights for "sell-e-brating" during latest three day period:

• Disappointing outlooks in tech Wednesday from Autodesk (ADSK) and Salesforce.com (CRM).Crowded crowd-pleasing carry trade starts to show wear and tear Thursday. Semiconductor (INTC, MXIM, TXN, MRVL) downgrade at Merrill citing inventory worries. Weak data include hotter CPI data, in-line but still woeful claims data of 505K, one-out-of seven homes in foreclosure Q3, slight leading indicators miss. Larger technical outlook remains suspect.

Market Snapshot


Figure 1: S&P500 (SPY) "Fifth-Fifth" Top

It turns out Monday night's continued focus on something other than what the bulls were selling turned out to be quite helpful by "Turnaround Thursday." After back-to-back going nowhere inside candle days that held the widely-touted 1100 level as crowd support, investors opted to schnitzel a little something.

Entering Friday, we're looking at what I described as a "Fifth-Fifth" in this week's Hot Shots for the SP-500. In conjunction with the failure of 1100 to hold and the 50% retracement level from all-time-highs acting as resistance the past three sessions-the directional inclination is to see more "red chutes" than the green shoots variety in the days ahead.

On the other more optimistic hand or hoof, I personally draw the line in the sand on this type of counter-trend entry with the recent highs. If the bulls do use the typically robust seasonal winds to their advantage once more, a rather substantial technical air pocket does look to exist.

Fundamentally, the green shoots bulls are devouring are giving this strategist a stomach ache. Nonetheless, I would be willing to turn down the volume on the boob tube and focus on riding the market into the upper left quadrant of a more important monitor worth watching, if that proves the direction with the least resistance. I just happen to see the bearish delta as being long overdue for a rally that's bound to pinch the "first pullback" crowd.

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 117 - 123.
• FTD on day six of rally per outfits like IBD.
• November thru April strongest six months for equities historically.
• One man's bearish "Fifth-Fifth" is another's uptrend.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl
• At 68%, market's run has "Come a long ways, baby." Green Shoots priced in.
• Mostly long-term overbought market conditions/weak internals.
• Q3 "Recession is over" data confirmation.
• Estimated minimum corrective support zone 99.50 - 102 testing.
• "Fifth-Fifth" SPY W5 stalls out at 1100 & 50% retracement, divergent oscillator and distribution.
• Last week's VIX Stretch finds lowly double bottom retest on Wednesday.

RADAR WATCH

From the Bulls Radar, ADC Telecom (ADCT) reported a $0.13 profit beat with earnings of $0.17 on better-than-expected revenues and guided "in-line" according to Briefing. Analysts there do note results may not be comparable. It appears other bulls are deciding as much with shares taking a hit after hours, down about 0.90 at 5.80 and breaking recent lows.

The pressure in ADCT comes despite the CEO offering overall optimistic message and just last night the Mad Money's Cramer stating, "People have to get with me on this (ADCT). This is a multi-year move...Do not be depressed by three weeks worth of action!" This market strategist will be curious to see if that means a "Monbacky!" is in order or whether the show must go on elsewhere-and likely far removed from the other reality program called mad money.

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.