MARKET ANALYSIS

A very “goog” Friday and some well deserved profit taking to start the week have the bulls still on top. For the two-day period, the “SPYder” (SPY) and the Naz’100 (QQQQ) are up .89% to 3.91% on more plain and simple accumulation.

A trifecta of solid reports from Google (GOOG), Caterpillar (CAT) and Honeywell (HON) and ability to look towards better days and past financial debris from Citigroup (C) resulted in the market’s best performance in two months this past week. Of course, some of that plain and simple accumulation did include the expired wishes of a few bears, which might mean something to those using something other than the K.I.S.S. system of charting.

Monday was as good a performance, although not for any perma-bulls’ intent on a straight line higher. Mixed news from BofA (BAC) spearheaded the finger pointing. The country’s second-largest bank saw its earnings release spun negatively or at least found investors seeking the negative following last week’s forgiving mood in the financials. A profit miss of sixteen cents and management expressing concern over the current quarter were the highlights for investors seeking scapegoats to take profits.

Overlooked by Monday’s less-optimistic investors, BofA still posted a profitable quarter and didn’t announce the increasingly popular move of dividend cuts or raising of capital as necessary. Further, total loans and leases for the first-quarter actually rose by 21% and imply firmer conditions than those still popularized by headlines of credit crunches.

Market Snapshot

Figure 1: NASDAQ 100 (QQQQ) Daily

As expected, a “GOOG Friday” was enough for bulls to keep their technical wits about them. The price move was the latest to confirm the broader market’s nascent rally. From there though, trading conditions have become more suspect from the short-term perspective.

While nice to look at, a second session of posted gains for the leading NASDAQ 100 (QQQQ) does have that instrument prone to pulling back. In of itself, that’s not necessarily a bad thing. During such times, overbought readings have the opportunity to ease and be digested via a price or time-based pullback. Typical of such processes, three to several sessions of consolidation activity might be expected. The last two pullbacks since the market confirmed its lows were four and seven days in duration, with the latter unfortunately triggering a failed “day 4” entry for many trend-trading technicians.

For counter-trend strategists there might be some opportunity to fade the trend. For it’s part, the “Cubes” are testing Bollinger resistance. At the same time, 2008’s first test of 20% in the VIX is thought relevant from a psychological perspective. That said though, I’d be more inclined to take such action only after an upside gap or another percentage push into the $48 area, where the 200-Day MA and some channel resistance come into play. For now, the observation is that the current levels merely represent reduced odds for successful bullish triggers, until some type of anticipated market pullback confirms a still-healthy market climate.

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

• FTD in place.
• Series of higher highs and higher lows in leading / growth-heavy NASDAQ.
• Super Bowl indicator: NFC win = +13% yearly gainer on robust 86% historical tendency.
• Jan / Feb +15 / 21 sessions with 1% or greater range in SPX historically points at gainers across all time frames, with 89% track record of yearly 16% gainer.
• AAII, Investors Intelligence, Market Vane & Consensus readings.

Bearish Technicals

• Five year up cycle since October 2002 lows.
• Weekly H & S Top DIA with daily MA “Death Cross”
• VIX test of key 20% first time in 2008.
• Shift by PS Elliott in W4 Sells > W4 Buys.
• PS Elliott W4 Sell in NASDAQ 100.
• S&P500 still flirting with bear market for some technicians.
• 20-week bull phase until late April.
• Short-term overbought-to-neutral readings broader market.

GROWTH STOCK ANALYSIS

Since our last report, gains for the broader market haven’t gone unnoticed by stocks in the Bulls Radar. With its latest move higher, FMC Tech (FTI) has climbed more than 10% since being posted a week ago. Similarly and also from a handle pivot, shares of Koppers (KOP) have reached that benchmark which this corner likes to use. Collectively, that action is excellent for directional strategists. However, it does qualify those names for removal in order to make room for fresher watchlist candidates, as they become available.

Confirmed handle entries on higher volume have been afforded to Research In Motion (RIMM) and Homex (HXM). As each is within a couple percent of the classic buy point, those names remain on the list and monitored for signs of additional health or deterioration until either a 10% plus move is offered or their respective pivots broken by 8%.

From the Bears Radar and following market adages into higher ground, Cummins (CMI) is being removed. A decisive break above lateral resistance and well-removed from recent lows is enough to warrant not holding an axe. That being said, a “Death Cross” (50 crosses 200) and overhead 200-Day MA may keep some as seeing those tea leaves as overall bearish. And finally, Hansen’s (HANS) did continue to provide downside resolve and less fizz for the bears. But, with Monday’s lows well in excess of 10% since being monitored and a higher volume reversal to boot, it’s time to remove the bear goggles in that name.

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 “Coiled Springs”

Table 2: Basing Watch list

The Bears

Table 3: Bear Watch list


Chris Tyler
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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