MARKET ANALYSIS
A bevy of mixed catalysts have found bulls operating with a bit more reason to be jolly—but don’t count the bears out just yet. For the three-day period, the
S&P500 (SPY) is up 3.87% in still hard-to-handle conditions.
Highlights for the market’s more “Obamaistic” behavior of the last three days:
- Turnaround Tuesday has short-term memories of bulls, bargain-hunting specials and better-than-feared GE (GE) business update to thank.
- Late day celebratory price spike in “Big Two” (GM, F) regarding detailed revamping for the Motor City leads to market-based follow-through day.
- Strong Amazon (AMZN) e-commerce report provides market leadership.
- Philly Fed sees loan volumes rise, while Dallas Fed states policymaker’s cap investments are helping.
- Government’s $500B mortgage support plan and dismal but better-than-feared results from Toll Bros (TOL) help build gains in housing.
- ECB cuts rates by 75 bps to 2.5% in latest effort to stimulate economies.
Highlights for the market’s less “Obamaistic” behavior beneath the surface:
- Warnings from Freeport (FCX), Alpha Natural (ANR) and RIM (RIMM) drag down commodity / infrastructure and tech sectors in out-the-gate thumper on Wednesday.
- Weak durable goods report, continuing claims data and worries over a worse-than-expected jobs report on Friday.
- Move lower to 4.5-year lows in oil (USO) and flight-to-quality in treasuries (TLT) act as worrisome harbinger.
- Trifecta of corporate layoff announcements from AT&T (T), DuPont (DD) and Credit Suisse (CS).
- Initial reaction to weaker-than-expected same-store sales (TGT, COST) and Wal-Mart’s (WMT) brand of business still apparently working, much to the chagrin of others.
- BernankeSpeak on need to curb home foreclosures and Big Two pleas going less well in Thursday’s session doesn’t help sentiment.
Market Snapshot
Figure 1: Dow Industrials (DIA) Descending
Since our last comments on Monday, the bulls pulled the rabbit out of the proverbial hat in scoring a higher volume percentage gainer known as a follow-through day. Coupled with the most intense and volatile corrective activity on record and December being a perennially strong month to step up to the plate—there’s certainly some solid technical evidence to appreciate the bullish case.
On the other hand and as discussed in last night’s HOTSHOTs, looking above at the daily view of the Dow Industrials (DIA) and it’s also quickly realized the bulls are still at risk. Lower highs are in place after a very generous fib-based percentage rally. Further, the fresh pivot high finds itself still up against resistance, while the most recent price action filled the gap from Monday’s drop, to form a double top of sorts.
Entering Friday, bulls and bears have the jobs data to digest. With three days of inside consolidation work, we should expect to see a price break following the report. Whether it’s actually a playable event is another matter entirely and largely dependent on the early reaction.
My thoughts are the bears maintain the slight upper hand, umm claw. A genuine lack of growth stock leadership and mostly poor action in the few candidates which do exist are key in that determination. However, if prices were to jump higher, hold and make fresh highs after the first hour of trade, a legitimate opportunity to try something other than “Sell the rips and buy the dips” likely makes more sense and hopefully “cents” as well.
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
- Seasonally kind Q4 tendencies.
- Test of 2002 lows S&P500.
- FTD 12/2 off 50% retracement.
- Neutral to bearish sentiment and technical indicators.
Bearish Technicals
- Lack of growth bases and sector leadership.
- Downtrend confirmed 12/1.
RADAR WATCH
Movement in component radar stocks has been mostly volatile but non-committal over the last three sessions. Only McDonalds (MCD), much to the chagrin of my bearish crystal ball, has moved beyond being able to look the other way. On Wednesday, the stock closed above its “Death Cross” and then further confirmed its strength by forging a one-month closing high on increased volume.
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 |
Caterpillar | (CAT) | Machines | 1-26 | 11-13 | Qtrly Up |
Covance | (CVD) | Research | 1-29 | 11-20 | Yearly Supports |
Aluminum China | (ACH) | Aluminum | Check broker | 11-20 | Double Bottoming |
Table 1: Bull Watch list
Non-Directional
Company | Symbol | Sector | Earn. | Tracked | Pattern |
NA | NA | NA | NA | NA | NA |
Table 2: Basing Watch list
The Bears
Company | Symbol | Sector | Earn. | Tracked | Pattern |
Chevron | (CVX) | Oil & Gas | 2-2 | 11-17 | Weekly Bear Flag |
Apple | (AAPL) | computer | 1-22 | 11-19 | Descend Triangle |
Dow Ind | (DIA) | Index | NA | 11-19 | Desc Tri. |
Table 3: Bear Watch list
Chris Tyler
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.
Growth stocks, market technicals, bullish stocks, bearish stocks,
