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Market Barometer: September 12, 2012

By Chris Tyler, Optionetics.com | Wed September 12, 2012 9:58PM PT


MARKET ANALYSIS 

Bulls continue to test for technically unlimited upside and sterilized historical tendencies in front of the Fed. For the weekly period, the SP-500 (SPY) is mostly flat with a gain of 0.04% as bulls look to promote that this time really is different once again.

Highlights for supporting a sterilized bear: 

  • Monday follow-through for ‘rails and roads’ China spending program.
  • “Just right” 8.9% industrial production for China summons stimulus hopes.
  • German court strikes down ESM injunction.
  • US wholesale inventories data shows 0.7% increase vs. 0.3% forecast.
  • An Apple (AAPL) a day after iPhone5 & Co. updates assists bulls Wednesday.

Highlights for resistant bears still in the mix:    

  • Seasonal “Worst Six” aspirations.
  • Monday’s overbought conditions and technical up-channel resistance.
  • Uncertainties surrounding Troika and Fed…well, sometimes.
  • Worse-than-forecast French GDP,
  • Moody’s warning on US credit.
  • German Finance Minister states country is against debt union and shared liability.

Technicals

Figure 1: SP-500 (SPY) Daily Chart

Following Monday’s topping candle which triggered amidst overly-complacent VIX ($VIX) near and longer-term readings and September’s bearish historical tendencies, bulls have surprisingly managed to pick up the pieces in front of tomorrow’s FOMC meeting.

Some may label the behavior as constructive with its narrow three days of price consolidation. Given the stated background evidence which supports the bear’s case for lower prices, that seems even more approachable and technically, we can’t completely ignore the action.

That said however, if trader’s are inclined to make the optimistic leap of faith and believe this time really is different, we’d suggest not letting that confidence breed complacency and opt out of protecting one’s portfolio with rather cheap protection which still looks like it could come in handy. 

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.
  • High level double bottom confirmation off 1400 and mid channel support.
  • Test of support 142, 139.50 – 140.

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” and ominous September / October period.
  • Monday’s VIX differential of 15.5% and move back towards five-year lows.
  • Up-channel resistance 144 - 145.

RADAR WATCH                                            

Entirely unsurprising, we’re taking McDonalds (MCD) off the Bears radar. Bulls have opted to squirt a bit of green technical “catch-up” on shares during the past few days since we warned of taking a smaller loss on the likes of a bear call spread rather than risk a potentially larger loss at expiration and unsupportive technicals not confirming to stay the course.

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

Company

Symbol

 Sector

Earn.

Tracked

  Pattern

Strategy

General Motors

(GM)

Auto

11.3

8.29

Weekly bottom

IT-OTM Long call

Table 1: Bull Watch list

Non-Directional

Company

Symbol

Sector

Earn.

Tracked

Strategy

NA

NA

NA

NA

NA

NA

Table 2: Basing Watch list

The Bears

Company

Symbol

Sector

Earn.

Tracked

  Pattern

Strategy

SP-500

(SPY)

NA

NA

8.8

Channel / Double T

Long Bear Time Spr.

Nike

(NKE)

Retail

9.27

8.15

Bear flag

Bear call spread

Table 3: Bear Watch list
 

 

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. 

 


Recent articles by Chris Tyler, Optionetics.com


September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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