Friday’s jobs report looks to steal the official spotlight this week, but a recently employed bull is still mostly about “Fed Up” optimistic behavior. For the five day period the SP-500 (SPY) is up 1.80% as bulls move forward with proclivities other than “Sell in May and go away” after a seasonally strong “Best Six.”
THE WEEKLY NUTSHELL
- “Manufactured “Risk Off” Monday.” SP-500 finishes off 0.84% on Day 9 of “bear flag” back below 50SMA. Apathetic Chinese and Eurozone PMI contraction readings, as well as unwanted, possible political upheavals for France and Netherlands raising fiscal budgetary concerns are primary catalysts pressuring bulls. The iShares Bull ETF (AAPL) swoons roughly 3% intraday to total corrective move of 13.50% before reversing into hammer close and down just 0.22% at 50SMA in front of Tuesday night’s closely-watched earnings extravaganza. Wal-Mart (WMT) slumps 4.66% following Sunday Times spread exposing corruption, bribes and tax evasion tied to its Mexico operation. And off the grid, homebuilder DR Horton (DHI) constructs top and bottom-line earnings beat on stronger closings and healthy operating position.
- “Spaghetti Western Appetizer Tuesday.” In front of main serving of Apple (AAPL), Clint Eastwood-like, “Good, The Bad and The Ugly” confessionals manage to find bulls nibbling in inside candle gainer of 0.37% for SP-500. Good and well-received results spearheaded by 3M (MMM), AT&T (T), Illinois Tool (ITW) and Baker Hughes (BHI). “The bad” or not good enough finds Texas Instruments (TXN) and Coach (COH) bowing to profit-taking. And ugly “Sell, Sell, Sell!” style maneuvering is easily spied in Netflix’s (NFLX) 13.90% tumble. Economic data finds similar mixed results with “the good” courtesy of better-than-forecasted new home sales of 328K for March, “the bad” from slightly-worse-than-expected dip in consumer confidence to 69.2 vs. 69.5 estimate and marginally uglier Case-Shiller dip of -3.5% vs. -3.4%.
- “iShares Bull ETF & Bullnanke Stimulate Bulls.” Day 11 of market’s rally attempt sees bullish FTD signal led by NASDAQ’s 2.3% jump and SP-500’s 1.38% higher volume gainers. Supporting the action, bulls gobble up Apple’s (AAPL) massive top and bottom line beat despite “conservative” below views guidance with the iShares Bull ETF finishing up 8.87%. Boeing (BA) assists bulls out-the-gate flight with well-received beat. Bullnanke & Co. allow bulls to follow-through with early efforts as more stimulus is hinted at despite hawkish tone of Fed officials. Being passed on by bulls, mixed results and pressured response for Caterpillar (CAT) and a less-than-sturdy durable goods report for March showing a drop of 4.2% vs. 1.7% forecast.
- “Follow-Through Thursday.” After flat start and choppy first half, bulls stage second half rally to lift SP-500 to 0.67% gainer to challenge 1400 level. Surprise pending home sales increase of 4.1% vs. 0.5% forecast finds initial bid from market participants and reasserts its influence on investors later in session despite worse-than-expected weekly claims data of 388K vs. 373K estimate, steeper-than-forecast EC economic sentiment indicator and mostly disappointing confessionals from the likes of ExxonMobil (XOM) and UPS (UPS) exerting pressure on the broader markets.
- “Fed Up Friday for Bulls.” SP-500 manages to eke out 0.24% gainer slightly through 1400. Albatross’ of S&P downgrade to Spain’s sovereign debt by two notches and much weaker dip in US Q1 GDP to 2.2% versus Q4’s 3.0% and Street estimates of 2.7% keep a lid on prices going into weekend as bullish optimism appears to continue its QE3 joyride courtesy of Bullnanke’s “prepared to do more as needed” FOMC playbook from Wednesday afternoon. VIX ($VIX) finishes just off three week lows and roughly 12% below 10SMA, while Greenback (UUP) slips into test of two-month double bottom low. Bulls are allowed to look the other way as the iShares Bull ETF (AAPL) slips 0.77% in profit-taking as Amazon’s (AMZN) 15.75% earnings reaction on top and bottom-line beat takes up the technical slack for the Naz’.
WEEKLY CALENDAR OF KEY UPCOMING EVENTS
Economic: Income & Spending (0.2% & 0.5%), PCE Core (0.2%), Chicago PMI (60.0). Wildcard Eurozone credit markets and Middle Eastern geopolitics.
Earnings: Alliance Resource (ARLP), Harman (HAR), Humana (HUM), NYSE (NYX), Sohu (SOHU).
After Hours: Anadarko (APC), FMC (FMC), Genco (GNK), Jacobs (JEC), McKesson (MCK), Sourcefire (FIRE), Suncor (SU), WMS Ind (WMS).
Economic: ISM (53.0), Construction (0.5%), Auto & Truck (5.4M & 5.7M).
Earnings: Arch Coal (ACI), Archer Dan (ADM), Avon (AVP), Biogen (BIIB), BP (BP), Cummins (CMI), DineEquity (DIN), Foster Wheeler (FWLT), Harris (HRS), Marsh McLennan (MMC), Office Depot (ODP), PF Chang’s (PFCB), Valero (VLO), TRW (TRW).
After Hours: Amdocs (DOX), Broadcom (BRCM), Chesapeake (CHK), CBOE (CBOE), Flextronics (FLEX), Genworth (GNW), TripAdvisor (TRIP), Unum (UNM), Watts (WTS), World Fuel (INT).
Economic: Weekly Crude, MBA Mortgage Index, ADP (170K), Factory Orders (-1.8%).
Earnings: Comcast (CMCSA), CVS (CVS), Devon (DVN), Energizer (ENR), Garmin (GRMN), InterActive (IACI), ICE (ICE), MasterCard (MA), Time Warner (TWX), UBS (UBS).
After Hours: Allstate (ALL), Continental Resources (CLR), Green Mtn (GMCR), Intrepid (IPI), Murphy (MUR), Visa (V), Tesoro (TSO), Transocean (RIG), Weight Watchers (WTW), Whole Foods (WFM).
Economic: Weekly Claims (375K), Continuing Claims (3.30M), Challenger Job Cuts, ISM Services (55.5), Productivity Q1 Prelim (-0.6%).
Earnings: Aecom (ACM), Airgas (ARG), Apache (APA), Cardinal Health (CAH), CIGNA (CI), Corinthian (COCO), GM (GM), Hyatt (H), MGM (MGM), Quanta (PWR), Sara Lee (SLE), Western Refin (WNR).
After Hours: AIG (AIG), Can Nat R (CNQ), CF Ind (CF), Dolby (DLB), Fluor (FLR), Kraft (KFT), Manitowoc (MTW), Public Storage (PSA), Rovi (ROVI), Sapient (SAPE), SW Energy (SWN), Trimble (TRMB), ZAGG (ZAGG).
Economic: BLS April Jobs Report (162K, private 167K, unemployment 8.2%).
Earnings: Aon (AON), Duke (DUK), Estee Lauder (EL), ITT (ITT), PPL (PPL), Exelon (EXC).
Figure 1: SP-500 (SPY) Weekly Chart Topping
I read a bit of matter-of-fact style analysis of “the trend” being up on Friday. That doesn’t leave much to hang one’s hat on, but growth advocates Investor’s Business Daily would approve after Wednesday’s more quantifiable follow-through day or FTD. On that front, we are more agreeable with having had to take a step back from our Fibonacci-based butterfly top which looked to cap off a slightly early but truly strong “Best Six” run and one aligning itself nicely with the seasonally bearish “Worst Six” period.
On the other hand, the signal doesn’t mean we’re overly-bullish on the market’s prospects. In fact, we remain skeptical of its ability to notch fresh highs and control of investors’ wallets with any long-term authority given all the bearish divergences beneath the surface away from camera’s focused on the musculature of one or two company’s like Apple (AAPL).
Entering Monday, our view is the real trend that’s up right now isn’t the market, but expectations of the Fed’s accommodative trend regarding more quantitative easing. We don’t have a PhD in economics or even consider ourselves to be well-read on such matters, but we’ve seen enough charts regarding the positive relationship between such policy and the market—and it’s a tough one to fight. But until that day does come along, treading lightly given the fore-described bearish technicals seems good enough sense.
- First Week Effect 2012.
- Mid-level testing of 1343 – 1371 with fearful VIX signaling during recent lows.
- FTD signal.
- Fibonacci based butterfly completion around test of 1400 with triple doji high.
- Failure of Transports (IYT) and small caps (IWM) to confirm rally.
- “Early” Best Six complete from October corrective lows.
- SP-500 bearish flag complimenting butterfly top into Worst Six period.
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