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Thursday’s market pressure doesn’t spook bulls on Friday the 13th, but what will expiration week bring to the table with the US Dollar in play and plenty of retail data on tap? For the five-day period, the SP-500 (SPY) is up an additional 2.32% as a historically friendly tendency continues despite further suspect participation.

THE WEEKLY NUTSHELL

• A “Moooving Monday” for bulls. Fifth straight gainer for SP-500 signals Follow-Through Day as G-20 vows to “reassure” global economic recovery. Announcement drives usual green shoots suspects linked to commodities (GDX, OIH, and XLB) and riskier currencies. Kraft (KFT) sweetened bid for Cadbury (CBY) and NBC Universal (GE) / Comcast (CMCSA) joint agreement aids bulls.  
• “Tepid Tuesday” as bulls pause in mixed and fractional doji fashion. No economic data and mixed corporate confessionals. Beazer’s (BZH) and Priceline’s (PCLN) better-than-expected results and Monsanto’s (MON) late leadership courtesy of investor conference headline for bulls. News from Bloomberg of AIG (AIG) able to repay its Fed Reserve credit line and large chunk of Treasury’s investment also aids in market’s constructive-looking profit-taking.
• “Under-the-surface humper for bulls on Wednesday.” Gainers and fresh intermediate highs courtesy of stronger-than-expected Chinese factory output and Japanese core machinery orders. Usual green shoots casting call in commodities-based picks and shovels (GDX, CAT, FCX, SLX, CLF). Two in a row as Toll Bros. (TOL) updates with beefed up Q4 net signed contracts and normalized cancellations. For the bears, lowly VIX with stretched 10-SMA differential greater than 17% intraday and 35% slump from highs seven days prior. SP-500 finishes in gravestone doji on lower volume, despite cheered positive finish.“Turnaround Thursday” for bulls. Distributive reversal day for overbought topping pattern in majors (RSTs and doubles) as surprisingly strong crude inventories report sparks demand worries and tied-at-hip economic concerns. Black Gold (USO) slumps and leads with -3.16% drop as the green shoots carry trade (GLD, GDX, SLX) unravels and Dollar unsurprisingly aids as the “unwind” gains popularity. A few bulls cling to mixed Wal-Mart (WMT) beat, Hewlett (HPQ) stirring up “takeover chowder” with $2.7B premium deal for 3Com (COMS) and still weak but better-than-expected claims data of 502,000 further confirms “jobless recovery.” Almost some scary profit-taking for Friday the 13^th. Topping follow-through from Thursday finds modest counter out-the-gate bid on well-bid retail (JCP, DIS, and ANF) reports. Weaker-than-expected “BOOyahs!” from Michigan (66 vs. 71 est.) finds bulls jeering then cheering on likely optimistic spin of confirmed rate relief. Strength in EUR/USD off 50-SMA support i.e. dollar weakness and associated risk averse bargain hunting in commodity asset classes aids bulls efforts.

ON TAP THIS WEEK

Retail and solar headline for earnings sector hounds this week. That said, the latter has lost much of its sizzle as far any linked momentum in the broader market and as a group trades decidedly mixed these days. Select names of interest include Trina (TSL), Canadian Solar (CSIQ) and Suntech (STP).

As for the former group, retailers such as Sears (SHLD), Gap Stores (GPS) and Target (TGT) are some of the focus stocks on trader’s radars next week. Additionally, with a one-two punch to kick off the week with home improvement goliath’s Lowe’s (LOW) and Home Depot (HD)—earnings not packing much influence of late on Mr. Market are likely to see an uptick in that department (store) despite the seasonal festivities nearly all but over.

Dell (DELL) is also a name likely to grab headlines and potentially adding some lift or drift to the broader market. Technicians are free to battle with words and indicators as to whether DELL’s current stock price near 15.25 is part of a weekly bull flag or a daily downtrend that’s toiling with the 50-SMA. Analysts expect the computing giant to earn $0.28 per share versus last year’s $0.37 when it releases results Wednesday evening. What’s said or not said on conference call should provide further clues as to whether bulls or bears win the battle on the charts.  

Economic watchdogs will have their paws full of data which runs the gamut of both growth and pricing and with the likely ability to move and motivate traders. Retail sales will kick things off Monday morning. Analysts expect an increase of 0.9% and 0.4% when factoring out autos. The results will represent a second month’s worth of spending information without the benefit of the Cash for Clunkers program. Hence, revved up results could find bulls cheering; unless of course that ol’ rate pondering thing manages to come into play.

And finally, the whereabouts of the still lowly US Dollar remains crucial to the success of equity bulls who continue piling on board green shoots inspired, commodity-related carry trade(s). Bernanke will likely have some say on those matters when he speaks during Monday’s session to the Economic Club of New York. And an early week jaunt to Asia for President Obama which focuses on trade relations with the likes of China could also impact the dollar and of course, those intertwined markets like equities.    

Weekly Calendar of Key Reports

Monday:
Economic  Retail Sales (0.9%, 0.4%), Empire (29.0), Biz Invs (-0.6%)
Earnings  American Dairy (ADY), Lowe’s (LOW), Perfect World (PWRD), ReneSola (SOL), Longtop Financial (LFT), Pac Sun (PSUN), Sina (SINA)

Tuesday:
Economic  PPI & Core (0.1%, 0.5%), Net LT TIC Flows, CU & IP (70.8%, 0.3%)
Earnings  Canadian Solar (CSIQ), E-House (EJ), Home Depot (HD), Jacobs (JEC), Saks (SKS), Target (TGT), TJX (TJX), VanceInfo (VIT), Autodesk (ADSK), La-Z-Boy (LZB), Salesforce.com (CRM)

Wednesday:
Economic Housing Starts & Permits (599K, 580K), CPI & Core (0.2%, 0.1%), Weekly Crude
Earnings  BJ’s (BJ), Chico’s (CHS), China Sunergy (CSUN), Solar fun (SOLF), Donaldson (DCI), Gymboree (GYMB), Hot Topic (HOTT), Jack Box (JACK), Limited (LTD), NetApp (NTAP), Netease (NTES), PETsMART (PETM), Woodward Gov (WGOV)

Thursday:
Economic Weekly Claims, Leading Indicators (0.4%), Philly Fed (10.8)
Earnings  Children’s Place (PLCE), Dick’s (DKS), Gamestop (GME), Ross (ROST), Patterson (PDCO), Suntech (STP), Sears (SHLD), The Buckle (BKE), Trina (TSL), A-Power (APWR), Aruba N (ARUN), Dell (DELL), Dress Barn (DBRN), Gap (GPS), Zumiez (ZUMZ)

Friday:
Economic  NA
Earnings  Am Car-Mart (CRMT), AnnTaylor (ANN), DR Horton (DHI), Smucker’s (SJM)

TECHNICAL PICTURE 

 

Figure 1: S&P500 (SPY) Weekly

This strategist has to go with what he sees, besides the uptrend still in motion. As of Friday’s close this means putting aside bullish developments of late such as a market follow-through day and the robust “best six months” seasonal tendency. Instead, the focus is on an extended light volume rally of late, confirmed daily chart reverse symmetrical and double top formations on distribution and a bearish VIX Stretch this past week.

On the other hand, this strategist is open to the very real possibility of short-term momentum and isn’t willing to defend the bear camp if fresh highs are notched. The coming week is marked by the November expiration cycle. As much, the potential for bulls to goose the market does maintain its midweek advantage and could do so on increased volume i.e. accumulation. Whether such action is a reflection of willing buyers or merely shorts covering fast switching deltas is open for debate. The only certainty is that should it occur, I’d rather stay out of harm’s way despite an admitted bias of seeing the optimistic discounting by bulls having run its course.  

MARKET LAB

Bullish Technicals

• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Weekly Inverse H & S being breakout from October lows. “MM” of 113 – 120.
•  FTD on day six of rally per outfits like IBD.
• November thru April strongest six months for equities historically.
• Expiration week bias.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Fourth time the charm? Potential W5 Daily and W4 Weekly in SPY.
• Confirmed “Extended” 13-week topping as part of 13-5-15 cycle.
• Recent Q3 “Recession is over” data confirmation.
• Seven day weaker volume rally off lows & “mixed” FTD spells bear market
• VIX Stretch signal of plus 17% Wednesday. 
• SPY bearish gravestone doji double top distribution and DJ-30 “RST” pattern.
• Extreme readings in Rydex Beta Chase and RSI Spread per Sentimentrader.com.

Chris Tyler
Senior 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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