Some tech bulls were spotted partying like it was 1999 this past week. Elsewhere though, mixed earnings and some well-deserved financial schnitzeling have effectively countered easing crude realities for many. For the five-day period, the “Naz’100 (QQQQ) and SPYder” (SPY) are mixed from a decliner of .40% to a gainer of 1.53% in a market still littered with bear tracks.

THE WEEKLY NUTSHELL

• An ever-familiar Monday bullish gap and general failure. Fourth day of financials spearheading on BofA’s (BAC) “bte” and “keep the dividend” news. Roche 41% and $44B cash tender for remaining Genentech (DNA) stake acts as bullish prop, as does Paulson’s “safe and sound” message regarding the banking industry. Second half reversal courtesy of Merck (MRK) / Schering (SGP) Vytorin concerns and a bid in oil on strengthening TS Dolly reports reduce early efforts towards the unched marker.
• 2^nd round of Tech Wreck 2008 (AAPL, VOD, TXN, SNDK) on actual disappointments or optimistic expectations dashed. Miss and warning by American Express (AXP) and Wachovia (WB), as well as dividend cut in latter aid out-the-gate pressure for markets. For the closing and victorious bulls, “bte” reports (CAT, DD, UPS, LMT), well-received GE (GE) Middle East arrangement, a change of heart in WB and most financials and oil giving back TS Dolly gains.
• Volatile Wednesday finishes weak but green on session. Fading TS Dolly concerns and lower and fresh 1.5-month low in crude support equities. Imminent passage of credit bill for F & F (FRE and FNM) and very mixed crop of earnings has trader sentiment accentuating the positive (WHR, T, GD, ISRG and WLP). Disappointing reports (COST, CHRW and BA), VIX Stretch and extended market gains of past week limit the bull.
• “Thumping Thursday” as greased and buoyant optimism gets punctured. Poor existing home sales and larger-than-prepped loss at Ryland (RYL) spearhead market decline. Rekindled fears regarding Freddie & Fannie i.e. stocks suited for profit-taking, sparks credit worries and pummels financials (XLF) on fast turn of sentiment. Headline read on increased weekly claims acts as background catalyst for worry. Ironically enough, mixed earnings but “bte” results and outsized cheer for Qualcomm (QCOM), Amazon (AMZN) and Baidu (BIDU) have some partying like its 1999.
• Bargain-hunting but choppy Friday has “bte” durable goods, new home sales and cheer from Michigan to thank. Bears and bulls not finished with profit-taking / trend rotation in oil keep visions of businesses and consumers benefiting and market bulls with their game faces on. “BTE” results (ACI, JNPR, FO, BNI, TROW, LM) aid in market support. Intraday bobbing and weaving as financials (XLF) fail to lift following Thursday’s hard schnitzel. “F & F” put on CreditWatch Negative by S&P agency.  

ON TAP THIS WEEK

Wall & Main should stand ready to see more of the same ol’, same ol’ as far as what’s likely to push or prod the market. The financial sector (XLF) boasts no reports of notice on the official earnings radar. However, daily surprise announcements have been and likely remain a part of the trading equation of what’s likely to motivate bulls and bears into action.

As for those key slated Q2 reports, outside of the financials this week’s crop remains a heavy and influential one which runs the gamut of industry groups. The implied market influence is worthy of a bullish resolution on any given day. Nearing the third week of the reporting season though and the ability for upside surprises to spawn favorable investor reaction could be facing a more challenging period.

Black gold and the US Oil Fund (USO) were off roughly 5% last week, bringing the two week swoon in excess of 15% from its mid July all-time-highs. Thus far, the price slide has remained a support for equities as investors see relief for businesses and consumers as the net result.

The question might be raised whether continued weakness in oil prices could turn current cheer into worry as investors see the action as foreboding economic weakness? Conversely, while investors don’t typically like the prospects of higher oil, after a large percentage sell-off, strength if matched by a rally in the influential energy complex (XLE, OIH) certainly can’t be underestimated as worthy of market bull’s affections.

Economic watchdogs will have to wait patiently until the second half of the week before finding any meaningful and officially-sanctioned stats of notice. Tuesday will provide a report on consumer confidence and Wednesday, a report on private sector job growth from the ADP. Neither data point is expected to garner much in the way of session-long cheer or fear.

On the other hand, Thursday and Friday offer much in the way of growth and price reports that will be closely-watched and should prove to be of the tone-setting variety. One key report will be the Advance GDP reading on Thursday morning. Estimates are for 1.8%. In secret though and with the likes of Briefing.com expecting 2.8%, traders might anticipate that anything less than a strong consensus beat will translate into a disappointment. 

Weekly Calendar of Key Reports

Monday:
Economic N/A
Earnings Kraft (KFT), Sohu (SOHU), Tyson (TSN), Verizon (VZ), Atheros (ATHR), CF Ind (CF), Mosaic (MOS), Walter (WLT), Zoran (ZRAN)

Tuesday:
Economic Consumer Confidence (50.0)
Earnings AGCO (AG), Coach (COH), Continental Resources (CLR), Lear (LEA), Nat Oil (NOV), Northrop (NOC), RTI (RTI), SAP (SAP), Sony (SNE), US Steel (X), Under Armour (UA), Valero (VLO), Centex (CTX), Gen Cable (BGC), Genworth Financial (GNW), Lam Research (LRCX), O’Seas Ship (OSG), Watts (WTS)

Wednesday:
Economic Weekly Crude, ADP (-48K)
Earnings Arcelor Mittal (MT), CNX Gas (CXG), Corning (GLW), Cummins (CMI), Garmin (GRMN), Hess (HES), Moody’s (MCO), Office Depot (ODP), Owens C (OC), Siemens (SI), Cleveland Cliffs (CLF), Covance (CVD), Buena SA (BVN), First Solar (FSLR), Genco (GNK), Itron (ITRI), Ocean’ Intl (OII), Starbucks (SBUX), SW Energy (SWN), Tetra Tech (TTEK), Disney (DIS), Visa (V)

Thursday:
Economic Weekly Claims (380K), GDP/Chain Deflator (1.8%, 2.8%), ECI (0.7%), Chicago PMI (49)
Earnings Aetna (AET), Apache (APA), Barrick (ABX), Borg W (BWA), Kodak (EK), CONSOL (CNX), Exxon (XOM), Goldcorp (GG), Kellogg (K), MasterCard (MA), Motorola (MOT), Parker H (PH), Tesoro (TSO), Chesapeake (CHK), Chiquita (CQB), Dolby (DLB), KLA Tencor (KLAC), Massey (MEE), Monster (MNST), Stanley (SXE), Vertex (VRTX)

Friday:
Economic Truck / Auto Sales, Jobs Report (-68K, 5.6%), Construction (-0.3%), ISM (50.5)
Earnings Chevron (CVX), CIGNA (CI), NYSE (NYX), Oshkosh (OSK), Sun Micro (JAVA), Tidewater (TDW)

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Weekly

The market’s ability to stabilize on lighter volume following Thursday’s percentage price swoon appears to be a good sign for bulls. The observation from this market strategist is to side with caution, rather than getting caught in too optimistic of a mood. One point of concern and as noted most recently in the Growth Stock report, the classic “FTD” or follow-through day time window never materialized.

Late FTD signals can still occur and have been known to foretell decent rallies of an intermediate nature. But, in conjunction with suspect sector leadership, Wednesday’s bearish VIX Stretch and what’s viewed as a bear market rally in the financials (XLF), “Buy the dips and sell the rips” until and if that heavier volume percentage thrust day appears, seems a reasonable approach.   

MARKET LAB

Bullish Technicals

• Mid July sentiment / extremes worthy of intermediate low.

Bearish Technicals

• Bear Market.
• Scattered growth with few bullish and stabile trends.
• Past ideal FTD window.

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.