With an overly-confident full court press and more twitch-than-witch behind bulls, some March Madness style profit-taking looks to be setting up. For the five day period the SP-500 (SPY) is up 4.53%, a Fibonacci-based butterfly complete and a couple very good reasons to see the bears steal the next period from the bulls in the works.
THE WEEKLY NUTSHELL
- “Full Court Press Takes Timeout Monday.” Bulls pause with 0.02% inside candle gainer following last week’s second half assault on prior highs. Light news day, but Apple (AAPL) noshing bulls assist in orderly offensive hold in broader market with its 1.25% gain to fresh all-time-highs on additional and favorable color iPad3 updates. China-based Youku.com (YOKU), “the YouTube of” operator announces intentions to buy peer Tudou (TUDO) for roughly $1.0B and 200% plus premium. Oracle (ORCL) acts as modest drag with downgrade-related dip of 1.39% below 200SMA support. And traders get a headline break from credit market and geopolitical drivers which help send the VIX ($VIX) down a complacently confident 8.50% to 15.65% with action hitting fresh pre-volatility explosion lows and stretched in excess of 15% from 10SMA.
- “Terrific Tuesday.” Bulls go on a complacently confident shopping spree Tuesday as SP-500 logs gain of 1.81% thru May resistance to fresh intermediate highs as VIX swoons 5.37% to five year lows and oversold close of 14.80%. Support for bid begins in premarket as bulls follow overseas markets optimistic cue. Retail sales assist with 1.1% and 0.9% ex autos increases vs. 1.0% and 0.6% forecasts. “No surprises” FOMC announcement, though one which shows a steadily improving economy less likely to receive additional stimulus programs, is met with modest indecision early in second half. Well bid gains of about 0.70% are improved upon by another 1.10% or so following surprise JP Morgan (JPM) buyback and dividend raise in front of stress test results taken as a sign of health for country’s financials (XLF).
- “Stress Testing Wednesday.” Bulls challenge 1400 in SP-500 and close with thoughtful but tenuous doji dip of 0.12%. For the bulls, Apple bursts higher by 3.78% on pair of target lifts to $720 - $725, while government issued stress tests for key financial institutions (JPM, GS and BAC) yields a pleasant passing grade of 15 of 19. Bid Greenback (UUP) on Fed’s upside plug for US economy turns pressures gold (GLD) and silver (SLV) to technical breakdowns of 1.68% and 3.10%. VIX crawls above 15% in still precarious position off five year lows and near-term complacency signal issued this week.
- “Bulls Buy the 1400 Doji App on Thursday.” In front of Friday’s anxiously-awaited Apple iPad rollout, shares tag $600 before succumbing to modest profit-taking of 0.68%. Bulls in the SP-500 however, snap up Wednesday’s “1400 Doji App” as the index gains 0.60% to close at 1402 on foursome of pleasing enough economic reports. Claims fall by better-than-expected 14,000 to 351,000, while continuing filings drop to 3.34M from 3.42M. Empire Survey climbs narrowly higher from 19.5 to 20.2 much to the surprise of Street views of 15.0. Philly Fed rises in-step with estimates of 12.5 from 10.2 and PPI data shows lighter-than-forecast 0.4% increase versus 0.5% and in-line core reading of 0.2%. Lower oil prices send the badly-lagging transports (IYT) soaring higher and led by the airline group (LCC, UAL, DAL). The 20-Yr (TLT) challenges its 200SMA from below with a narrow 0.17% gain following two days of rotation out of risk free asset class following an all-but-quashed QE3 program.
- “More Twitch than Witch Friday.” Quadruple Witching produces tight 0.11% gain in SP-500 narrowly above 1400 psychological resistance. One very green Apple of late finishes 0.00% and flashes possible “game over” app for bulls as iPad Verion3 finally debuts. Economic data on day comes in mixed. Industrial production takes an unexpected turn with 0.00% reading compared to views of 0.5%, though January sees upward revision of 0.4% to 0.4%. Michigan sentiment for March comes in light at 74.3 versus prelim forecasts of 75.8. Total CPI for February shows in-line 0.4% increase but lighter-than-forecast core reading of 0.1% versus estimates of 0.2%.
WEEKLY CALENDAR OF KEY UPCOMING EVENTS
Economic: NAHB (31). Ongoing Middle East geopolitical / oil stresses and potential wild card credit market drivers out of Europe.
Earnings: InterOil (IOC), Adobe (ADBE), Focus Media (FMCN).
Economic: Housing Starts & Permits (705K & 695K).
Earnings: DSW (DSW), Tiffany (TIF), Jeffries (JEF).
After Hours: Cintas (CTAS), AAR (AIR), Jabil (JBL), Krispy Kreme (KKD), Oracle (ORCL), SAIC (SAI).
Economic: Weekly Crude, MBA Mortgage Index, Existing Homes (4.61M).
Earnings: Actuant (ATU), General Mills (GIS).
After Hours: Discover (DFS), Herman Miller (MLHR), Sonic (SONC).
Economic: Weekly Claims (355K), Continuing Claims (3.36M), FFHA Housing Index, Leading Indicators (0.6%).
Earnings: ConAgra (CAG), Dollar General (DG), Gamestop (GME), Perry Ellis (PERY), Signet Jewelers (SIG), UTI Worldwide (UTIW).
Figure 1: FedEx (FDX) Weekly Chart
Sometimes euphemistically called “market barometer” air and ground carrier FedEx (FDX), reports Thursday in the premarket. Analysts expect $1.35 per share compared to last year’s $0.81 on sales of $10.62B. Technically speaking, FDX shares have lagged the broader market but in the process, look to be completing a bullish first stage cup-shaped weekly base with handle formation.
After Hours: Cost Plus (CPWM), Micron (MU), Nike (NKE), Silver Wheaton (SLW).
Economic: New Home Sales (321K).
Earnings: Darden (DRI), KB Home (KBH).
Figure 2: SP-500 (SPY) Weekly Chart
While bulls wait to see if FedEx can deliver a special package to the upside, a Fibonacci-based butterfly pattern we’ve been tracking over the past couple months has reached a well-detailed price objective of 1400 slightly early with a month still left in the market’s “Best Six” calendar cycle. Butterfly patterns can classically extend 1.31% and even 1.62% past the pattern inception of our annotated Wing 1 highs from last May, but we’re more inclined to see the game of March Madness getting underway shortly.
Realistically speaking, aside from the strong price run since the October and December corrective lows, the most recent action needed to marginally overtake the 1400 level has been courtesy of a confidently complacent investor served up this past week. With the VIX ($VIX), the market’s most well-watched gauge of investor sentiment stretching 20% past its 10SMA while simultaneously hitting five-year lows; we can’t help but say, “Buyer beware”….unless it’s protective premium as part of a limited risk option strategy.
- First Week Effect 2012.
- October’s historical bottoms.
- “Best Six” period for market.
- 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 hits 5-year lows and signals short-term complacency.
- Fib-based butterfly target of 1400 complete.
Index or Sector Proxy
1360 – 1370, 1350, 1300 - 1320
1400 - 1406
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.