MARKET ANALYSIS 

A tricky Tuesday and “wins-day” for hedge hogs sets up an opening bid Thursday. For the weekly period, the SP-500 (SPY) is up about 0.85% and now technically testing bears seasonal patience and aspirations.

Highlights for supportive but more cautious bulls: 

• PMI results from Spain and UK.
• Report of “unlimited, sterilized” bond program for ECB.
• Germany’s Dem Party head notes Greece can be assisted if “she does her homework” helps lift country shares (GREK) to near 5% breakout.
• Airlines (LCC, UAL) take-off on strong August revenues data.

Highlights for bears nurturing double tops: 

• Seasonal “Worst Six” aspirations.
• Moody’s cut on EU outlook from “Stable” to “Negative.”
• Weak (non-stimulating) PMI data from Germany, France, Italy and China
• Disappointing ISM and construction misses stateside.
• Aussie GDP falls short with weaker Chinese commodity demand cited.
• Coal producers (WLT, BTU and ANR) get buried to three year lows on downgrade.

Technicals

Figure 1: SP-500 (SPY) Daily Chart

On the heels of Tuesday’s, narrow intraday breakage of the SP-500’s double bottom pattern, mid-channel and 1400 support followed by a tight doji decision candle; bulls are confirming their technical resolve out-the-gate Thursday. With the market up about 1%, the SPY has cleared recent pivot highs within its three to four week congestion pattern while modestly taking out the key April highs.

In conjunction with the VIX ($VIX) having recently set three week highs, bid back to more normalized and much less complacently bullish absolute levels in the high teens while finding a fairly staunch 10SMA differential of 14%; bulls are one-upping bearish seasonal tendencies and have decent reason to remain in control. That said, keeping an eye glued to the sentiment gauge for warning signs of investors getting optimistically carried away and a failure to maintain opening bid, technically looks to make a good deal of sense and cents.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• Established 5 point uptrend off 30SMA and Channel support in SPX.
• Third FTD signal 7.26.12.
• Well-bid VIX back into normalized high teens and recent 14% 10SMA differential.
• High level double bottom confirmation Thursday off 1400 and mid channel support.

Bearish Technicals

• Fibonacci-based butterfly into 1400 completes March / April.
• SP-500 bear flag into double top pattern.
• Historically weak June and July FTD signals.
• Seasonally weak “Worst Six” entering ominous September / October period.

RADAR WATCH                                            

We’re watching McDonalds (MCD) closely as its position on the Bears radar is at risk after narrowly pressing above a key bearish pivot high from August 6 in Thursday’s first hour. Personally, we’d view any continued intraday strength as a reason to take the money and run; which in this instance would be a lighter loss in the likes of any bear call spreads which are at risk of going in-the-money.   

RADAR SCREEN
The following optionable stocks look to have a combination of technicals and fundamentals that might warrant further investigation based on a trader’s own methodology and risk acceptance. The list is not a recommendation and is intended for educational purposes only.

The Bulls

Table 1: Bull Watch list

Non-Directional

Table 2: Basing Watch list

The Bears

Table 3: Bear Watch list
 

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
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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.