“Retail, retail, retail!” confessionals are on tap, but will bulls shop or drop with another Greek impasse this weekend increasing credit market uncertainty? For the five day period the SP-500 (SPY) improved upon its “Sell in May” efforts by 1.15% as bulls hang their horns on a second rally attempt; and bears, a downtrend in motion.

THE WEEKLY NUTSHELL

• “Bulls Stage a Resistant Front Monday.” Despite overseas fallout and plenty of headline style headaches over Eurozone’s ability to fix debt crisis following French socialist win and pending Greek election anti-austerity upheaval, bulls manage to maintain price action in the SP-500 near unchanged mark for 0.04% doji gainer. VIX ($VIX) tests 20% level but fails to signal fearful stretch or reach April’s panicked levels tied to market’s corrective lows. Global X FTSE Greece 20 ETF (GREK) slumps 6.34% but iShares MSCI France Index (EWQ) climbs 1.28% while EUR/USD rallies and reverses back above key 1.30 level.
• “Terri-bull, Then Terrific Tuesday.” SP-500 finishes off 0.43% but well off losses of about 1.50% in hammer reversal pattern. Second half rally finds investors steering into bargain-hunting mode following intraday 0.75% break of April lows and fearful retest of April highs in VIX. First half weakness attributed to an about face, non-defiant, “we changed our minds” heightened sense of concern over fate of Eurozone.
• “Rinse and Repeat Wins-Day.” Another session of opening weakness tied to continued Eurozone concerns dictated by Greece’s political uncertainty undermining austerity measures, as well as reports of Spain’s government requesting banks for additional $45.0B in coffers to safeguard against bad loans. Second half rally off marginal lower lows with second daily hammer finish finds SP-500 cutting losses in half to just 0.67% and confirmed by another session of fearful VIX confirmation for buyers.  
• “Technically Correct Rally Attempt Thursday.” SP-500 pulls back from best levels, but bulls bid broader market all session to confirm corrective low with 0.25% rally attempt. Headline reprieve from both a potential Greek Tragedy and the pain in Spain, coupled with overly-fearful VIX and second hammer undercut are primary drivers for bargain-hunters. At the same time and keeping a lid on the bid, Cisco’s (CSCO) “macro headwinds” below views guidance, rising weekly claims of 367K versus forecasted 365K and wider-than-expected trade deficit of $51.8B.
• “Sell in May, Back in Play on Friday.” After a near first-half dismissal of JP Morgan (JPM) “egregious mistake” of $2.0B in CDS positions and embracing better-than-forecast PPI and consumer sentiment data, bulls fold their bluff in Friday’s second half as SP-500 reverses lower to finish off 0.34% and at a narrowly fresh, new closing low. Aiding and abetting the decision to exit, weekend holding risk in front of Greek government coalition negotiations, and pair of weaker-than-expected reports on industrial production and retail sales from China suggesting continued, deteriorating economic growth.

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Wildcard Eurozone credit markets spearheaded by failed weekend talks to form a new government in Greece and growing German voter opposition to austerity measures. China’s central bank cuts reserve ratio for member banks in effort to help stimulate its economy.

Earnings: InterOil (IOC), Silver Wheaton (SLW), Seadrill (SDRL).

After Hours: Agilent (A), Groupon (GRPN), Photronics (PLAB).

Tuesday:
Economic: Retail Sales (0.2% & ex-auto 0.2%), CPI & Core (0.0% & 0.2%), Empire (8.4), Business Inventories (0.3%), NAHB (26).

Earnings: Dick’s (DKS), Home Depot (HD), Saks (SKS), TJX (TJX), Valspar (VAL), VanceInfo (VIT).

After Hours: J.C. Penney (JCP), Pan Am Silver (PAAS), Ralcorp (RAH), Sina (SINA).
Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index, Housing Starts & Permits (680K & 730K), IP & CU (0.5% & 79.0%), FOMC Minutes.

Earnings: Abercrombie (ANF), Chico’s (CHS), Citi Trends (CTRN), Deere (DE), Staples (SPLS), Target (TGT)

After Hours: Ctrip.com (CTRP), GT Ad Tech (GTAT), Hot Topic (HOTT), Jack (JACK), Limited (LTD), Netease (NTES), Red Robin (RRGB).

Thursday:
Economic:  Weekly Claims (365K), Continuing Claims (3.25M), Philly Fed (8.8), Leading Indicators (0.2%).

Earnings: Advance Auto (AAP), Buckle (BKE), Children’s Place (PLCE), Dangdang (DANG), Dollar Tree (DLTR), Gamestop (GME), Precision Castparts (PCP), Ross (ROST), Sears (SHLD), Wal-Mart (WMT).

After Hours: Aeropostale (ARO), Applied Materials (AMAT), Autodesk (ADSK), Gap (GPS), Intuit (INTU), Marvell (MRVL), Salesforce.com (CRM), Youku.com (YOKU), Zumiez (ZUMZ).

Friday:
Economic: N/A.

Earnings: ANN (ANN), Brown Shoe (BWS), Foot Locker (FL), Hibbett Sporting (HIBB).

TECHNICAL OUTLOOK

Figure 1: SP-500 (SPY) Daily Chart

As discussed in our recent Trader’s Radar piece titled “Sell and Even Buy in May, But Don’t Go Away”, there’s a time and place for everything. This past Wednesday and manifesting itself on Thursday out-the-gate, fast money bulls and certainly in-the-money bears, had good reason to either nibble or cut negative delta exposure given a stretched, overbought VIX ($VIX) which narrowly took out its April corrective highs, as well as a second hammer undercut of the SP-500’s lows.

Entering Monday and two sessions removed from that analysis, the SP-500 is still squarely at those levels and the short-term bull case is a bit less interesting as sentiment neutralized itself down into 10SMA support, though rebounding to close just below 20% and about 8% above the key short-term average. That said, our view is bulls playing or still looking to nibble need to respect the rally attempt low of 1343 and hope for a high-powered FTD or Follow-Through Day to signal this week or face the likely bearish consequences of a market that’s topped and constructing a daily downtrend as it proceeds through May and further into the seasonally weak Worst Six period.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• Rally Attempt off low end of key support zone with VIX Stretch confirmation.

Bearish Technicals

• Fibonacci based butterfly completion around test of 1400 with triple doji high.
• Failure of Transports (IYT) and small caps (IWM) to confirm rally.
• Worst Six seasonal period.
• SP-500 sporting daily chart downtrend with weekly failure to move off channel support.

Chris Tyler
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.