“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
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).
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).
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).
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).
Earnings: ANN (ANN), Brown Shoe (BWS), Foot Locker (FL), Hibbett Sporting (HIBB).
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.
- First Week Effect 2012.
- Rally Attempt off low end of key support zone with VIX Stretch confirmation.
- 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.
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