Change text size

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

MARKET ANALYSIS

Reversing the reversal of the larger reversal, bulls square off with "Dow 10,000" and a potential H & S top. For the three day period the SP-500 (SPY) is up 2.43% on more cheers than motivated punch from bulls.

Key highlights for buying a little "MOOyah!" during the three day reprieve from lows:

• Friday / Monday oversold corrective conditions.
• Tuesday's "All Aboard" war cry from Buffet camp's $100 Burlington (BNI) bid.
• Beats of notice and influence include Cisco (CSCO) and Cognizant (CTSH).
• "Give 'em what they want" status quo update from FOMC Wednesday.
• Slightly worse but expansion ISM Services and "trending nicely" ADP data.
• SIA boosts semis global growth to 10.1% for 2011 Thursday.
• Pleasing productivity surprise of 9.5% and better-than-feared claims data.

Key highlights for "sell-e-brating" a little during the latest relief rally:

• J&J (JNJ) produces tears for several thousand pink-slipped employees.
• Semi sector ((SMH, INTC, ALTR, SNDK, XLNX, KLAC and ARMH) receives multiple downgrades Wednesday.
• Larger technical outlook.

Market Snapshot

Figure 1: S&P500 (SPY) Daily H&S Topping?

CNBC didn't make mention of my weekly ascending wedge that's been the cautious-to-bearish basis of this strategist's focus in recent weeks. But in Thursday's session it was noted, amongst all the cheers for "Dow 10K!" the SP-500 was facing a potential Head & Shoulder top.

Back in July of course, a well-documented H&S pattern broke its neckline, sucking in bears and bulls alike into defensive posturing. The shift couldn't have been more ill-timed as it occurred right in front of a substantial multi-day rally which broke the pattern before staging even stronger gains and fresh highs for the index.

Is the second time the charm? Much like last time, this strategist likes the idea of selling into "feigned" strength during the development of the right shoulder versus waiting for neckline confirmation. The risk associated with knowing if we're wrong or right is likely much tighter [107.30 - 108.15] and can often make position initiation and exiting much easier when the crowd sees things differently.

Four days off the lows and weak associated overall volume with the move, once furrowed brows now looking relieved and the list of bulleted points favoring the bearish verdict-and "Dow 10K!" sounds like reason to "sell-e-brate."

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

• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
• Day 4 of FTD window per outfits like IBD.
• November thru April strongest six months for equities historically.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Fourth time the charm? Potential W5 Daily and W4 Weekly in SPY.
• At 65%, market's run has "Come a long ways, baby." Green Shoots priced in.
• Mostly long-term overbought market conditions/weak internals.
• Confirmed "Extended" 13-week topping as part of 13-5-15 cycle.
• Q3 "Recession is over" data confirmation.
• Estimated minimum corrective support zone 99.50 - 102 testing.
• Four day weaker volume rally off lows = countertrend and overbought entry.
• H&S pattern resistance 107.40 - 108.15 SPY.

RADAR WATCH

Last time we stated that a lot could happen to market prices between that report's delivery and our next update. The possibility of a slippery oversold slope becoming more so or a bullish FTD occurring, were two front runners for seeing things that way.

Both outcomes were off the mark, but the latter bullish event almost materialized. Price action was sufficient with the broader market's percentage thrust, but volume was lacking in strength. Bases and leadership from growth stocks are also by and large absent from the equation-still.

As much and with a jobs report likely to gap the market out-the-gate, I'm willing to go to bat with just one fresh name. Infosys (INFY) beat handily this week, offered strong guidance and maintained an overtly optimistic outlook on its conference call per findings from Briefing.com.

The NASDAQ 100 component is also forming a seven-week long "W" or high-level double bottom base-the type which growth traders should be more than just cheering for. That being said though and as recent "unofficial" watchlist candidate Calgon Carbon (CCC) is a reminder, this is a very fast and slippery money market still thought unworthy of long-term praise or commitments.

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 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

• March 16, 2010
  Midday Action: March 16
• March 15, 2010
  Growth Stock Swing Option: March 15, 2010
• March 15, 2010
  Midday Action: March 15
• March 14, 2010
  Weekly Outlook: March 15, 2010
• March 12, 2010
  Midday Action: March 12