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Investors kept the carving up of turkeys to venues outside the market last week on further government action and a more “Obamaistic” outlook. For the three and one-half day period the S&P500 ($SPX) cash is up 12.02% as traders say goodbye and hopefully “good buy” to a still very difficult November.

THE WEEKLY NUTSHELL 

• Bulls charge out-the-gate Monday on “uncertainty removal” for a “less @$#%! Citi” (C) under new TARP and $306B loan guarantee assistance. “Obamaistic” bid as the President Elect announces economic team and preliminary plans for undetermined but pricey stimulus / jobs package are more than just applauded by bulls and bears alike.
• Surprise $800B consumer / small business plan and new Term Asset-Backed Securities Loan Facility sends averages firing higher out-the-gate Tuesday. BHP Billiton (BHP) axes $68.0B hostile bid for rival Rio Tinto (RTP) weighs in on sentiment and commodities. Bearish industry mobile device report / Hewlett’s (HPQ) demand outlook impact gadget land (RIMM, AAPL), prompting relative weakness for Naz’, while Dow and S&P500 go on to sport third day of gains.
• Wednesday “Gobble, Gobble Turkey Trot” market action. “Opening Hell” economic [GDP, CC, Spending, New Homes, Claims, Durables, Chicago PMI and Michigan] and corporate disappointments (TIF, DE, TM) discounted intraday. Autos (GM, F) throttle forward on bailout speculation, pre-holiday seasonal bias and “Obamaistic tech toys for all” finds Naz’ leading the bulls higher.
• Mixed Friday for indices in abbreviated holiday conditions. S&P500 demonstrates relative strength on Citi upbeat $20B “normalized earnings” report from Barclays and despite initial “dropping and not shopping” consumers on Black Friday. Large cap tech lags with fractional decliner on ST Micro (STM) warning and Nokia (NOK) exiting bulk of Japanese market.

ON TAP THIS WEEK

It’s a busy week for economic watchdogs as plenty of market-moving testimony and data worthy of driving the indices will be provided. Out-the-gate, Wall & Main will find the first of two BernankeSpeak sessions, this one providing economic talk from deep in the heart of Texas. Additionally, the national ISM Index will be released and showing likely deteriorating manufacturing conditions, as well as more detailed and “up but weak” Black Friday sales data which marks the start of the holiday spending season.

On Tuesday, likely dismal-sounding auto and truck sales will be delivered and President-Elect Obama meets with governors in Philly. Wednesday afternoon will see anecdotal economic evidence courtesy of the Fed’s Beige Book. On Thursday, BernankeSpeak on the housing situation and the first of two days of Congressional hearings from the auto industry will have traders’ ears, eyes and fingers. In round two of the group’s plea for government funds, execs are supposed to present a detailed plan on a new, improved and sustainable Motor City.

“Sentiment” is going to be in the spotlight this week as well. It’s likely most all of the data and catalysts presented will be the type that has investors wanting to run and gulp down a bottle of Tums. Central to that idea will be Friday’s closely-watched monthly jobs data. That being said, as nasty as the environment is, uncertainty began in earnest last week in removing its grip on the market. Of course, billions more of taxpayer dollars being tossed at the likes of Citi (C) and other stimulus programs to jump start the economy aren’t ideal by any stretch. Nonetheless, the moves do provide some clarity where there had been none; while investors, by and large, did begin to buy into that idea. 

Weekly Calendar of Key Reports

Monday:
Economic Construction Spending (-0.9%), ISM (38.0)

Earnings Shanda (SNDA), Zoltek (ZOLT)

Tuesday:
Economic Truck / Auto

Earnings Beazer (BZH), Sears (SHLD), Solarfun (SOLF), Staples (SPLS), Marvell (MRVL)

Wednesday:
Economic Weekly Crude, ADP (-173K), Productivity (0.9%), ISM Services (42.6), Beige Book

Earnings Del Monte (DLM), Aeropostale (ARO), AeroVironment (AVAV), Casey’s (CASY), Diamond Foods (DMND), Synopsys (SNPS)

Thursday:
Economic Weekly Claims, Factory Orders (-2.7%)

Earnings Argon (STST), Jackson Hewitt (JTX), Sanderson (SAFM), Movado (MOV), Toll Bros (TOL), UTI World (UTIW), Williams Sonoma (WSM), Comtech (CMTL), Guess (GES), Teekay (TK)

Friday:
Economic Monthly Jobs (-300K, 6.8%, 0.2%)

Earnings Big Lots (BIG)

TECHNICAL PICTURE
 

Figure 1: Dow Industrials (DIA) Resistance
         

It was a week to be thankful for bulls. In the Dow Industrials (DIA) a three and one-half session rally managed to tack on nearly 10%. As such and entering Monday’s session, bulls should be a bit less “Obamaistic” about the next couple sessions. Prices are extended into angular downtrend resistance zone from roughly 85 – 90 and profit-taking might be anticipated.

Ultimately, it’s how the process of profit-taking is handled by the bulls that will likely dictate whether prices are bound for even lower levels or whether the November 21 reversal will represent an important intermediate low. The more constructive, rather than destructive the profit-taking—the more likely the market can establish a higher high above the early November pivot.

Helping the bullish case, PS Elliott has backed off its prior TAPP objective with a shorter Wave 5 completion, which bodes well for intermediate minded bulls. Additionally, the false descending pattern breakdown has confirmed an extreme corrective and lower low formation during a seasonally strong time of year for stocks.

On the other hand and re-emphasizing some anticipated backing and filling—coupled with a still weak crop of fresh growth bases and lacking leadership does present bears with a potential relatively low risk “sell the rip” scenario within a band of technical resistance. That being said, if traders are going to ply that approach, stop losses are essential to keeping the position honest with those original intentions—or risk being run down by something other than Santa’s reindeer. 

MARKET LAB
Bullish Technicals 

• Seasonally kind Q4 tendencies.    
• Test of 2002 lows S&P500.
• Day No. 5 of Rally Attempt 11/24.

Bearish Technicals

• Lack of growth bases and sector leadership.
• Angular resistance / short-term overbought conditions in major indices.

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. 

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