Change text size

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

MARKET ANALYSIS

A bull of sorts from the "Show Me State" corals a few investors to fresh highs Monday, but most still aren't buying it. For the two day period the SP-500 (SPY) is up 0.91% on turkey trot style volume.

Key highlights for some moderate "Buy, Buy, Buy!" above and below SP-1100:

• A St. Louis Fed official aptly named Bullard hints policymakers should extend mortgage back security purchases prompting Monday's out-the-gate bid.
• Reinvigorated green shoots on premise of continued low rates and immediately tied-at-the hip weaker US Dollar due to Bullard comments.
• Better than existing home sales data delights [6.10M vs. 5.70M est.] taking inventory down to 7 months and lowest since Feb 2007.
• Merger Monday news courtesy of fresh Hershey (HSY) bid rumors for Cadbury and Ciena (CIEN) purchasing bankrupt Nortel.
• Telecom leadership from recent laggard AT&T (T) and Verizon (VZ) following positive cover story from Barrron's.

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

• Friday's "Dude, It's a Sell" courtesy of disappointing tech report from computer giant Dell (DELL).
• Crowded crowd-pleasing carry trade shows wear and tear Friday as Asian policymakers consider cap controls and liquidity withdrawal talk from ECB.

Market Snapshot

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

The powers that be aren't making the task of trend trading or fading the market's historic rally an easy task. For the bulls, Monday's gainer reclaimed 1100 in the SP-500. Intraday and before pulling back, the price action also broke above the prior highs in the SPY by pennies. Those levels put the SPY briefly into a fairly large technical air pocket between resistance zones during a seasonally strong time of year for equities.

For the bears and maybe those fixated on a previously-described "Fifth-Fifth" top, a near session-long rejection of the first hour breakout attempt winded up producing a gravestone doji reversal pattern. Further and bearish, volume for the still green closing finish was markedly weaker than Friday's distribution day.

So, who has the upper leg? As discussed most recently in the Weekly Outlook, a sympathetic nod is being given to the bears until higher volume above 1100 enters the picture or if prices, despite volume, manage to close in the air pocket.

Volume of course is very likely to taper off the next two sessions, so its significance is a bit trickier to size up. Due to that, if prices do make a nice upward turn above the highs, I'd rather go with a trend that's cleared resistance than maintain a bearish view that would look increasingly like a grudge match with one less reason to support it.

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.
• Large technical air pocket above recent highs.

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

Diana Shipping (DSX) is being added to the Bulls Radar as a watchlist candidate. The name recently beat and is part of the "nearly-sunken, but given a life preserver" drybulk shipping sector. The company maintains little debt compared to its peers, which is thought important as existing debt covenants have been a bit of a fundamental iceberg in the space. Technically speaking, shares of DSX look to be establishing a handle high up in the right side of a five-month long cup-shaped base.

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
Visit Chris Tyler's Forum

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.

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Recent Articles by Chris Tyler, Optionetics.com

• February 9, 2010
  Midday Action: February 9
• February 9, 2010
  Growth Stock Swing Option: February 9, 2010
• February 8, 2010
  Midday Action: February 8
• February 3, 2010
  Hot Shots: Feb 3, "RAD" Action for Bears?
• February 2, 2010
  Option Watch: Feb 2, Strong LEAP by Bulls