Following a resistant and exhausted-looking push, a policy shift into profit-taking is on traders’ radars entering the week. For the five day period the SP-500 (SPY) is up 0.28% and looking tired after an “extended” run of 21 weeks and further testing of the May highs.
THE WEEKLY NUTSHELL
- “A Moo-ving Monday.” Bulls bounce back from early profit-taking losses tied to G-20 ultimatums Europe must commit more capital before further IMF involvement. Out-the-gate pressure also has completion of 13 and 21 week Fibonacci cycles set against May 2011 resistance in SP-500 and massive gains of 13% and 27% to appreciate. Nonetheless, after being down as much as 0.80%, support i.e. business as usual dictates a bid to work SP-500 back into positive territory by a narrow margin. Intraday better-than-forecast January pending home sales of 2.0% receives credit for initial turnaround, while financials (XLF) provide relative strength on session.
- “Half-a-Trillion Reasons Tuesday.” A still confident but tired looking bull of late manages to break through May resistance in SP-500 and 13K in DJ-30 as Apple (AAPL) nears the $500B mark on bullish anticipation of its new iPad3 unveiling next week. Bulls also enjoy the benefit of an intraday report on consumer confidence which easily tops forecasts by 8.8 points in rising to 70.8. Swept under the carpet, Case Shiller data misses views with 1.1% decline and durable goods data for January misses by wide and weak margin with total order drop of 4.0% versus expected dip of 1.4% and surprise ex-transport decline of 3.2% versus forecast gain of 0.2%. Silver (SLV) breaks out on massive 4.28% gain to confirm 200SMA trend change. Priceline (PCLN) assists Apple in securing Naz’ 100’s (QQQ) outperformance with shares up 7.0% following all-around beat and above-views guidance.
- “Leap of Faith Turns Wins-day for Bears.” Leap Day begins solidly out-the-gate as bulls continue to nibble on Apple’s (AAPL) $500B dangling carrot, cheer ECB’s slightly larger-than-expected 529B euro loan provision, N. Korea’s moratorium on nuclear testing, as well as enjoy a beefier 3.0% Q4 GDP estimate and Chicago PMI data of 64.0 versus flat views of 60.0. “No surprises” Bear-nankeSpeak disappoints as the promise of further quant easing is removed and becomes bulls undoing and catalyst to take profits. Late Beige Book report hinting of continued increase in economic activity tries to rally bulls but fails at unchanged level and invites sellers to redouble efforts into close. SP-500 finishes off 0.47% in engulfing bearish candle. Comex Gold (GLD) and Silver (SLV) go buggy with nasty profit-taking of about 5.50% and 6.50% on reaction to less accommodative Fed, bullish economic data and easing tensions with N.Korea.
- “Bulls Leap into March Thursday.” Bearish engulfing candle in SP-500 is dismissed as bulls counter with 0.61% gain to open month of March. Imbuing bulls to buy the pullback, better-than-expected same-store sales for February and flat weekly claims of 351,000 prove pleasing headline fodder. At the same time, disappointing income and spending (0.2% & 0.3% vs. 04% est.), construction (-0.1% vs. 1.0%) and ISM (52.4 vs. 54.5) data are swept under the bear skin rug. US Oil Fund (USO) spikes 2.0% on massive volume breakout from 3-day pullback pattern on rumors of demolished pipelines in the Middle East.
- “IPO YELP! Friday for Bulls.” SP-500 finishes off 0.32% in modest but rare bout of “Investors Pulling Out” style profit-taking. Internet based consumer ratings outfit Yelp! (YELP) debuts with near 64% gain to 24.58 in first day of trading following $15 IPO. No officially sanctioned economic data or earnings reports of any market influence, but US Oil Fund (USO) gets drilled by 2.35% in nasty and surprise technical counter attack to Thursday’s 3-Day “never-too-simple” pullback breakout. Pressure tied to misplaced fears of Saudi supply disruptions and continued strength in US Dollar (UUP).
WEEKLY CALENDAR OF KEY UPCOMING EVENTS
Economic: Middle East geopolitical / oil stresses and potential wild card credit market drivers out of Europe. Weekend news of China’s central bank plan to grow economy at 7.5% following its proactive fiscal and monetary program. Factory Orders (-1.9%), ISM Services (56).
Earnings After Hours: ABM (ABM), Giant (GA), Nutrisystem (NTRI), VeriFone (PAY), Casey’s (CASY).
Earnings: Dick’s (DKS), Scotiabank (BNS), Utd Nat Foods (UNFI).
Economic: Weekly Crude, MBA Mortgage Index, ADP (220K), Consumer Credit ($13.4B).
Earnings: American Eagle (AEO), Canadian Solar (CSIQ), Children’s Place (PLCE), Hovnanian (HOV), Maidenform (MFB), The Fresh Market (TFM).
After Hours: Coldwater Creek (CWTR), H&R Block (HRB), Men’s Wearhouse (MW), Pall (PLL), Sequenom (SQNM), Sigma Designs (SIGM).
Economic: Weekly Claims (355K), Continuing Claims (3.40M), Challenger (prior 38.9%).
Earnings: Buckle (BKE), Canadian Natural Res (CNQ), Core-Mark (CORE), Dynegy (DYN), Global Partners (GLP), JinkoSolar (JKS), Smithfield (SFD), Suntech (STP), Williams-Sonoma (WSM).
After Hours: Aeropostale (ARO), Alon USA (ALJ), Cooper (COO), Home Inns (HMIN), Ulta Salon (ULTA), Quicksilver (ZQK), Zumiez (ZUMZ).
Economic: BLS February Jobs Report (207K & 220K private, 8.3% unemployment), Wholesale Inventories (0.6%), Trade Balance (-$48.1B).
Earnings: AnnTaylor (ANN), Bioscrip (BIOS), Ferrellgas (FGP), Hibbett Sporting (HIBB).
Figure 1: SP-500 (SPY) Weekly Chart
Alas, perfection for a bearish turn in the SP-500 wasn’t meant to be. Time cycle completions of 13 and 21-weeks sporting heady gains of 13% and 27% into the May 2011 highs were extended and bullied past by a narrow margin this past week. Yet, with the occasional exception to the rule, like one very green Apple (AAPL), riding the trend continues to show signs of more erratic behavior beneath the surface which points at the increased risk of a percentage pullback in the offing.
Looking forward and a replay of last week’s technical outlook, the bigger picture remains focused on a Fib-based butterfly target of 1400 in April for the SP-500. But to keep the pattern looking symmetrically constructive and allowing Fibonacci to enjoy a “close enough” nod of respect, a pullback of 3% to 5% taking one to three weeks to produce looks about right before considering stronger opportunities for bulls to buy.
- First Week Effect 2012.
- October’s historical bottoms.
- “Best Six” period for market.
- Early Day 3 and late Day 17 FTDs.
- Fib-based Butterfly projection 1400.
- 1930 Bear Market Rally repeat states EW Intl.
- Bear market time and price still in effect.
- Historically weak FTD signal.
- 13 and 21-week Fibonacci time cycles complete with SP-500 at test of May highs.
- VIX back at pre-May volatility explosion levels.
- Symmetrical butterfly counter-trend pullback.
- Apple’s (AAPL) $500B carrot nibbled.
Index or Sector Proxy
1300 - 1320
1364- 1370, 1400
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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.