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Despite wild daily volatility, the bulls and bears wind up right back where they started… well, almost. For the five-day period, the S&P500 ($SPX) is registering a tepid .20% gainer that belies the week’s heady ups and downs, as well as a nascent bull market now in progress.

THE WEEKLY NUTSHELL

• No economic data or corporate surprises to kick-off the week, but investors go on the defensive. FDIC closes two more regional banks (RKH), much to nobody’s surprise. Rumors of Singapore-based Temasek pulling out of Merrill (MER) continue to make the rounds, spearheading market decline. US Oil Fund (USO) firms after two week and 15% decline.
• Bullish “Follow-Through Day” on Tuesday for market. Merrill announces $8.5B share sale to boost capital position and additional writedowns, providing clarity and “last dance” relief for group. Oil plummets to two month lows on mixed catalysts but taken as a bullish prop by equity investors. Other commodity bulls aid market as US Steel (X) and AGCO (AG) blast estimates and raise guidance, while coal producer Fording (FDG) receives $14B bid. Bulls all smiles in Colgate (CL). SAP (SAP) profit beat and Concur (CNQR) deal put some muscle on not-so-software (SWH) group and Amgen (AMGN) results continue solidify shareholder and biotech (BBH) approval of late. 
• More “Green skies” Wednesday for bulls. BTE results and responses (MT, SI, HES, CMI) and much stronger but dodgy ADP Survey spearhead investor support for second straight day. Fed extends duration of TSLF program. Similarly, policymakers extend short selling ban on select financials and Dubya signs supportive housing bill. Percentage surge in crude off weak gas inventories, USO up 4.13%, impedes rally midday. But 5.75% oil services gainer and prices still roughly 15% from July highs has bulls regaining lost territory late in day. 
• Volatile and lower Thursday. Disappointing earnings reactions (OII, EK, DIS, V, MA, XOM), weaker-than-pent up expectations for GDP on 1.8% and .1% miss. Surging claims to five year high. Greenspan spawns late day technical schnitzel for market with “Economy Still Far from Recovery” exclusive with CNBC.
• Friday fizzle as “bte” jobs report and in-line ISM data produce reaction bids, but fail to hold as not-too-secret whispers of upside surprise are built-in to prices. Disappointing results / action from General Motors (GM), Chevron (CVX) and intraday percentage jump help bulls’ schnitzel in front of the weekend.

ON TAP THIS WEEK

Entering the week, investors can expect more of the same as it relates the market-moving muscle of the financials (XLF) and Black Gold. That’s also to say that there’s a rather large question mark as to how prices and sentiment will proceed over the week. Ultimately, all-too-familiar daily surprises could be of the bearish or bullish persuasion and worthy of affecting market prices.

Earnings continue to pour in but the list of bonafide market movers is fewer in number. As was the case last week, moving further into the season surprises worthy of inspiring market bulls will likely prove a challenging task. That being said, Tuesday will be the week’s headliner. Insurer / Anchor Banker AIG (AIG) and fellow Dow component Proctor & Gamble (PG) report that morning, while tech bellwether and networking goliath Cisco (CSCO) reports that evening.

Perhaps though, the week’s most-likely earnings motivators for bulls and bears will be Fannie (FNM) and Freddie (FRE). The GSEs are expected to register sizable losses for the period. More important to Wall & Main are any clues as to how these companies will ultimately be regulated and capitalized going forward. Continued uncertainty in those areas could easily lead to further concern and bearish posturing and vice versa for the bulls, were clarity provided.

For economic watchdogs, the FOMC will announce its policy statement Tuesday afternoon. Traders generally expect the meeting to be less of a market catalyst this time out. Rates are heavily-wagered to remain unchanged at 2.00% for the next few months following recent data like last week’s weaker-than-expected jobs and GDP reports. However, as officials have voiced increased concern over inflation in recent testimonies, some uncertainty over the policy statement, as always, does exist. As such, traders can expect some pre and post intraday price swings, but not likely any associated cheers or jeers of a lasting nature.

Weekly Calendar of Key Reports

Monday:
Economic Inc & Spend (-0.1%, 0.5%), Factory Orders (0.7%)
Earnings Cooper (CTB), DISH (DISH), Humana (HUM), ICExchange (ICE), Fannie (FNM), China Med (CMED), Anadarko (APC), Bankrate (RATE), Qiagen (QGEN), Otter Tail (OTTR)

Tuesday:
Economic ISM Services (48.0), FOMC Meeting
Earnings Archer D (ADM), AIG (AIG), Brinker (EAT), DR Horton (DHI), Emerson (EMR), James River (JRCC), Leap (LEAP), Marvel (MVL), Procter & G (PG), Weyerhaeuser (WY), Blue Nile (NILE), Molex (MOLX), Cisco (CSCO), Multi-Fineline (MFLX), Ormat (ORA), Priceline (PCLN), Whole Foods (WFMI),

Wednesday:
Economic Weekly Crude, Consumer Credit ($6.0B)
Earnings Agrium (AGU), Blackstone (BX), Devon (DVN), Freddie (FRE), FTI Consult (FCN), Marsh McLennan (MMC), NASDAQ (NDAQ), Quanta (PWR), Sprint (S), Time Warner (TWX), Transocean (RIG), Yingli Green (YGE), CVD Rio (RIO), Eagle Shipping (EGLE), Sina (SINA), Sunoco (SUN), Teekay (TK), Tenaris (TS), VeriSign (VRSN)

Thursday:
Economic Weekly Claims, Pending Homes (-1.3%)
Earnings, Arena (ARD), Cardinal (CAH), Fortress (FIG), Natural Gas Srvc (NGS), OM Group (OMG), Sara Lee (SLE), Swift Energy (SFY), Deckers (DECK), Hansen (HANS), Public Storage (PSA), SandRidge (SD)

Friday:
Economic Productivity (2.6%), Wholesale Invs (0.6%)
Earnings MBIA (MBI), NA Tanker (NAT), Aircastle (AYR), TETRA (TTI)

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Daily

As discussed last week, late FTDs, or follow-through days, can occur and provide the platform for intermediate rallies worthy of participation. On Tuesday the market did register just such a day off a 62% pullback. A nice percentage rally ensued before investors once more opted to put on their less-optimistic eyewear.

Entering Monday, after two sessions of consolidating hear the closing highs of the FTD (annotated above), bullish swing traders have what’s observed to be a nice technical spot for entering the market. However, heightened volatility, paying homage to Elliott’s W4 and a slightly suspect FTD does have this corner continuing to appreciate the adage “Buy the dips and sell the rips” within a traders market type of environment.

MARKET LAB

Bullish Technicals

• Mid July sentiment / extremes worthy of intermediate low.
• Late market FTD 7/29

Bearish Technicals

• EW 4 and possible double top / bear flag near daily resistance S&P500.

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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