MARKET ANALYSIS 

A Greek Achilles Heel doesn’t prevent bulls from playing the game to fresh intermediate highs. For the three day period and counting, the SP-500 (SPY) isn’t exactly “flying” towards 1400 just yet but nonetheless showing strong resolve and up 0.38% in accordance with constructive and determined price action, as well as Fibonacci.

Highlights for bulls confidently constructive move into higher ground:         

• Larger weekly technical picture (see below).
• EUR/USD leadership and technical breakout in face of dragging Greek negotiations.

Key Reasons for bears trying to stay in the mix during winter:         

• Continued Troika impasse with Greece stokes bears early Monday and Tuesday.
• Varied and mostly lackluster earnings (DIS, TWX).

Market Outlook

Figure 1: SP-500 ($SPX) Weekly Fibonacci Butterfly

With the market continuing to hit fresh marginal intermediate highs this week, the lion’s share of vocal financial pundits have moaned about the situation being technically overbought. Our thoughts are they must not be using the same screening tools, filters and whatnot.

Looking above to Figure 1 and the SP-500’s weekly chart, a Fibonacci-based butterfly continues to influence our belief of the market ultimately reaching the 1400 level. What’s more, after two weeks of mostly lateral range trading on the heels of a 8-week run to the upside, the market has broken higher from a neutralized position. Further, we don’t yet see any bearish flags such as an overbought weekly RSI or the VIX ($VIX) signaling any short-term complacency within its grinding march higher.

Failing those type confirmations, we’re not willing to call a top or let alone even a strong need for a pullback, which at this point, we’d gather would be quickly bid by the folks chanting “Overbought.” In saying all that, leaning long with hard deltas in a grinding market like we’ve been doing for the better part of 2012, isn’t easy. Spreads, in particular verticals, are a good compromise for staying with the trend with less stress and probably stronger results as well.

And were a pullback in the likes of the SP-500 to begin earlier than expected, such as a “Sell the news!!” sigh of relief over closure with Greece, we’d see 1325 – 1330 as key support for the bull camp.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• October’s historical record for producing bottoms.
• “Best Six” period for market.
• Early Day 3 FTD and Late Day 17 confirmation.
• Fib-based bullish butterfly projection 1400.
• Recent b/o from 2-wk lateral hold of 1300 in SP-500.
• VIX neutralized short-term while trading in normalized teens.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• H & S weekly top SPY and trendline breakdown.
• Bear market time and price labels still in effect for some.
• Historically weak FTD.

RADAR WATCH

One fresh name of technical interest for the Bulls Radar is Naz’100 constituent Netapp (NTAP). The network storage play sports liquid options, is setting up, in our view, in a nice looking bottoming daily cup-with-handle or weekly “W” pattern and has an earnings catalyst on February 15 to act as potential upside fuel. In total and with one point wide strike distances, a tight and slightly OTM bull call vertical on reduced capital allotment, given the all or none nature of earnings reactions, looks interesting as a starting point for traders.

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 Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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.