Change text size

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Christopher Columbus would be impressed as bulls set sail for a brave new world in Monday’s session. For the “condensed” two day period the “Cubes” (QQQQ) and “SPYder” (SPY) are up 10.27% to 12.11% on heavy levels of “business as unusual” for market bulls.

Highlights driving daytraders back through “Dow 9K!” and beyond in a good and almost forgotten kind of way:

• Friday’s In-line results from GE (GE) sans any credit-related confessionals.
• Historic capitulation swoon on credit reviews for Morgan (MS) and Goldie (GS), disappointing Lehman CDS auction and continued tight and fragile global credit markets set up “Mama Bottom” conditions.
• Monday’s “Round Two” of global commitment by policymakers to restore liquidity and confidence to financial and credit markets.
• Morgan (MS) news of firm interested in acquisitions following Japan’s $9.0B Mitsubishi stake in the banker helps prompt near 90% daily gainer and restores some lost market confidence.
• CNBC interviews with legendary investors Julian Robertson and Mark Mobius find more pros putting in chips contrary to recent record mutual fund outflows.
• Technicals and sentiment equal “Game changers.” 

Market Snapshot

Figure 1: S&P500 ($SPX) Daily Game Changer

It’s “business as unusual” for bulls (and bears) caught sailing from the abyss or “Mama Bottom” as I’ve penned in most recent efforts. That same technical shifting of gears is also of the potential “Game Changer” variety. After the market’s worst bear market since the 1930’s, the bulls have day one or day two of a rally attempt under their belts.

Day one or day two of the follow-through day or FTD count is dependent upon where one looks. The NASDAQ Composite was the lone index establishing an attempted rally on Friday, although near parabolic percentage efforts in other indexes, did come darned close as well. After Monday though, it’s all a bit of a moot point as far as confirmation as across-the-board double digit percentage gainers were scored.

More important at this late juncture, in the short-term scheme of things, entering Tuesday and conditions have quickly become slightly stretched to the upside. That’s all relative of course. From the absolute bottom, the twenty-plus percent gainer in instruments such as the S&P500 does warrant caution. So do a couple Fibonacci levels near the current 1000 closing price, which are annotated in the daily chart shown above. However, given two to three days of technical backing and filling off what appears to be a very strong “Mama Bottom”—future “MOOyahs!” not solely the result of an oversold market condition look very much in order.
 

The following factors and anecdotal evidence might be considered relevant in determining a suitable, limited-risk strategy in the coming days and weeks ahead.

MARKET LAB
Bullish Technicals

• Knack for major market lows in October.
• VIX hits all-time-highs of 77%.
• Multiple bottoming failures and oversold RSI 14 below all qualified supports.DJ-30 finds support at 200-month SMA. Dumb / Smart $$ extreme spread at sentimentrader.com. Historic “Bullish For Stocks” vs “Bearish” 39 – 0 at sentimentrader.com as of Friday. Day one or two of FTD count.

Bearish Technicals

• Bear Market.
• Short-term overbought into potential resistance equals opportune time to schnitzel for knife-catching bulls.
  
  

RADAR WATCH

In lieu of the last couple sessions, some housecleaning from the Bulls Radar is in order; in a good sort of way. Google (GOOG), Suntech (STP) and the Dow Jones Industrials (DIA) are all being removed for performing a bit too strongly and now looking prone to some of that inevitable backing and filling written about above.

Somewhat similarly but not as “goog”, China Life Insurance (LFC), a member of the Bears Radar, is being dismissed due to its promiscuous rendezvous with the bull. There are still the likes of overhead moving average and price resistance to get through, but the incredibly high volatility and stronger volume off the lows, are enough to not carry an axe.

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
Staff Writer & Options Strategist
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. 

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Recent Articles by Chris Tyler, Optionetics.com

• December 1, 2008
  Midday Action: December 1
• November 30, 2008
  Weekly Outlook: December 1, 2008
• November 26, 2008
  Growth Stock Swing Option: November 26, 2008
• November 26, 2008
  Midday Action: November 26
• November 25, 2008
  Option Watch: November 25—The Other Most Actives