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MARKET ANALYSIS

Optimistic-sounding corporate confessionals take a backseat to a bearish driver in oil and an extended-looking topping pattern. For the three-day period, the SP-500 (SPY) is off a mild 0.49% in confirmed rally that's looking more and more like a turkey shoot.

Key highlights for buying a little "MOOyah!" after the latest and greatest chase:

• Pleasant and well-received corporate nuggets (BZH, TOL, PCLN, AIG, MON, WMT).
• Strong Chinese factory output and Japanese machinery orders provide out-the-gate incentive Wednesday for bulls' noshing on green shoots efforts.
• Latest word from Fed rates to remain low.
• Hewlett's (HPQ) $2.7B nuptial with 3Com (COMS) keeps M&A market support abuzz.

Key highlights for "sell-e-brating" a little following the market's latest lift to fresh highs:

• Jobless recovery remains intact despite lesser lines at unemployment counter per weekly claims data of 502,000.
• Crowded risk-aversion carry trade.
• Demand worries drill Black Gold Thursday on surprisingly strong inventory stockpiles.
• Larger technical outlook remains suspect.

Market Snapshot


Figure 1: S&P500 (SPY) Bear Market Rally?

One day doesn't make a trend, but they can be important turning points nonetheless. That being said, Thursday's distribution so close to a bullish but meager volume follow-through day in the market, isn't a great sign. The action is made more foreboding as Thursday's market prices also confirmed bearish candles such as the SP-500's gravestone top from Wednesday which has fulfilled a bearish higher high double top.

It's no secret this strategist sees little reason to befriend the market right now, despite its confirmed rally status per IBD and a historically strong time of year. More important, factors of a bearish persuasion continue to emphasis yielding to bullish instincts. With a pattern top in place, a VIX Stretch signal from Wednesday and an extended-looking and mostly ultra light volume percentage romp used to bully the bears to fresh highs-the bull is looking more like a turkey shoot.

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.
• FTD on day six of rally 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 66%, 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.
• 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.

RADAR WATCH

Monday evening we took a bullish "Monbacky!" selection from Dr. Cramer's playbook with ADC Telecom (ADCT). This strategist's reasons for caring were based on the stock's more technically appealing weekly chart levels versus the initial "Buy, Buy, Buy!" sponsorship from the market's late night host back in mid October.

Tonight however, our newest addition to the Bears Radar will be the Gold Miners ETF (GDX). The bearish entry happens to run in the face of a more recent Mad Money call from Wednesday evening regarding a "Buy, Buy, Buy!!" on the newly-listed Junior Gold Miners ETF (GDXJ).

The more tried GDX maintains a strong option market, while its sibling fails on that point. Additionally, the technical extension of the past several sessions has afforded the more mature ETF a nice-looking reverse symmetrical triangle that could spell a nice nip in the bud for the heavily hyped up green shoots-laden sector proxy.

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.

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