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Monday's investors can't hold intraday gains, but don't count out Friday's reversal just yet. For the two day period the SP-500 (SPY) is off 0.72% but day three of the market's rally attempt in place as we enter Tuesday's session.

Key highlights for nibbling with the "Market still Under Correction:"

• Technical extremes set Friday (See analysis below).
• Upgrades Monday of Amazon (AMZN) and Home Depot (HD).

Key highlights for continued profit-taking, umm "sell-e-brating" by investors:

• Friday's "PiGS" i.e. Portugal, Greece and Spain sovereign debt concerns.
• Weaker than expected decline in nonfarm payrolls confirms "jobless recovery."
• Toyota's (TM) ever escalating woes and other car (F) companies slowly following suite of late with similar product defects.
• Monday's Catch-22 of Bernanke mulling tighter credit down the road.

Market Snapshot

Figure 1: SP-500 (SPY) Daily Rally Attempt

Entering Tuesday's session and futures are pointed higher by about 0.80% in the SP-500 (SPY). The open, if it holds, reverses a good portion of Monday's second half squeal-fest related to items such as worries over debt "PiGS" and possibly tighter stateside credit down the road.

More important than clinging to a fleeting headline sure to be replaced, the broader market is entering day number three of its third rally attempt off Friday's technically correct and hard hitting reversal candle. By "technically correct" I mean the deep but much needed 9.10% correction, the 38% pullback from the July lows, plus the combination of a VIX Stretch signal of more than 25% and a near 30% test which penetrated equally squeal-like highs of 28% set in late January.

For intermediate-minded growth bulls, days four through seven are the "ideal" window for a high-powered percentage thrust to occur which would then act as confirmation for the rally attempt. The event is known as a follow-through day or FTD. The FTD is noteworthy as no major market low has ever occurred without the presence of this event in place. In saying that, there can be "false" or busted FTDs before a meaningful intermediate rally takes hold. Also the "ideal" window isn't pure science as slightly late (confirmed) and perhaps even a slightly early day three FTD (not confirmed) can occur.

Until the FTD does occur, "buying the dip" when the occasional situation appears attractive enough, much like the circumstances presented in and around Friday's lows; will be watched for one or two bullish reversal / bounce opportunities.

Likewise and following the inevitable FTD, "selling the rips" will still likely make sense and "cents." At that time, buying dips might be done more aggressively once the more benevolent trend for intermediate bulls is in place. However, after a historic rally of about 70% and ten months in duration, price action that finds stocks (indices) butting their heads against resistance during overbought conditions, will likely prove still attractive for bears.

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

• November thru April strongest six months for equities historically.
• Corrective activity of roughly 9.10% for SP-500 with 38% test July lows.
• Third Rally Attempt on 2.5.10 for market in conjunction with VIX Stretch.
• Tuesday marks day three of "FTD" count.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl
• Mostly long-term overbought market conditions/weak internals.
• Q3 "Recession is over" data confirmation.
• High volume break below key 1100 and 50-SMA supports in SP-500.
• Waning momentum to fresh highs after 10-month long historic rally.
• IBD's "Market Under Correction" and growth leadership largely M.I.A.

RADAR WATCH

Since our last report a full week ago, it's not exactly "Breaking News!" of there being oodles and oodles of more oversold names out there, even after Friday's fairly strong reversal off lows. For me, the message remains the same. Intermediate bulls waiting for breakouts, realistically need to wait for additional market confirmation in the form of an FTD.

For other like-minded and sometimes-value oriented bulls out there, one or two of your favorite deep discount bets put into the portfolio still rings true. However, money management when the register can be rung in what can only be called fast money conditions is also considered a necessity of doing and remaining in business.

On that note, a nice but fleeting 5.00% run off the 200-SMA to a near test of 50-SMA resistance in the likes of Foster Wheeler (FWLT) may have proved opportunistic for a few bulls, particularly if they winded up using legged short stock as a hedge. In the here and now and FWLT significantly lower but a couple levels of Fib support down to the 24 area on the weekly chart showing up, I'm keeping the name posted. The belief is that in a mad money environment that demands patience and less "Buy, Buy, Buy!" type actions on a daily basis, FWLT is about as good as it gets.

Finally, from the Bears Radar, both Texas (TXN) and the SP-500 (SPY) are being removed. For its part, shares of TXN performed nicely over the last three to four weeks for bulls but could now be shaping up a weekly high-level double bottom pattern relative to its October lows. And as for Mr. Market, 9.1% versus a textbook perfect 10% correction and all the evidence already noted above as being in place, means the bear's edge was drastically reduced with fair warning in and around Friday's nadir.

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.

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