Following a full court press in last week’s second half, bulls look to regain control of the game but still have the FOMC and May resistance to get past. For the five day period the SP-500 (SPY) is up by a very narrow 0.09% with bulls a bit more well-rested after a couple of weekly periods more or less on the bench.

THE WEEKLY NUTSHELL

• “A Rare Monday Mourning for Bulls.” SP-500 cuts losses in half but finishes off 0.36% as “extended” Fib 13 and 21-week time cycles into May high resistance find a bearish pause. Driving bulls into some business-as-unusual, China unexpectedly cuts 2012 growth target to 7.5%, its lowest in 8 years and European PMI data disappoints with sharp downturns in Italy and Spain prompting concern of region falling back into recession. Intraday, slightly better-than-expected ISM Services Index and factory orders data is met with selling pressure. An early “Green Delicious” Apple (AAPL) bid on hopeful iPad3 unveiling later this week gets cut down in profit-taking with intraday losses of nearly 3.5%. Reaction into 10SMA and subsequent bounce is instrumental in major averages gyrations. Pullback buyers fail to work SP-500 into positive territory as Greece warns during second half it may activate “CACs” if debt swap terms aren’t met with its creditors, which would put country on brink of outright default.
• “Terri-Bull Tuesday.” SP-500 suffers worst bout of profit-taking in 2012 with decline of 1.54% and technical break of key 10SMA. Global economic growth called into question for second straight day as Europe’s GDP shrinks by 0.3% in Q4. Concern in front of Greece’s debt swap also continues to act as a market drag. EUR/USD slumps to sixth day of lower lows, commodities (GLD, SLV and USO) gap lower and display relative weakness with losses of 2% to 3%, while the VIX ($VIX) soars 15% through 50SMA and generates fearful overbought differential relative to its 10SMA.
• “Wins-Day for Bulls!” Rebound play overseas on allayed fears in front of Greek debt swap, mixed but “good enough” ADP private jobs increase of 216K, stronger-than-forecast 0.9% productivity increase and intraday chatter Fed may, after all, consider additional quant easing inspire bulls to bargain-hunting gain of 0.69% in SP-500 on slightly lighter volume. VIX slides 8.62% to 19% from fearful positioning.
• “Apple Baklava Noshing Bull Thursday.” Appreciative upside Apple (AAPL) turnover of 2.13% and growing investor optimism of successful Greek debt swap headline for bulls pushing SP-500 higher by 0.98% to reclaim, in total, all of “Terri-Bull Tuesday’s” “worst of” worried moans. ECB and BofE stand pat on rates as expected and no conference call surprises. Weekly claims come in worse-than-forecast with increase of 8,000 to 362,000 vs. 355,000 forecast. And bulls find a beef with McDonald’s (MCD) as shares trim some fat of 3.21% after cautioning on its Q1 income growth due to persistent economic global uncertainties. VIX sheds nearly 6% to close at 17.95%and narrowly below 10SMA in obviously more confident and “we’re missing out!” action.
• “Full Court Press Friday.” Bulls gain another 0.38% in SP-500 as two day rebound hits prior week’s price rim. Confirmation of successful Greek debt swap pleases bulls as does news of better-than-expected nonfarm payrolls growth of 227,000 and private jobs of 233,000. Background hesitation of traders worried the trend of a stronger labor market might dash hopes of another round of quant easing did stymie initial efforts of placing a bid into the market as did intraday news of a credit event and technically a default on the part of Greece as having had occurred.

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Middle East geopolitical / oil stresses and potential wild card credit market drivers out of Europe. Treasury Budget (-$229.0B).

Earnings: American States Water (AWR), Urban Outfitters (URBN), Synergetics (SURG).

Tuesday:
Economic:  Retail Sales (1.0% & 0.7% ex auto), FOMC Decision.

Earnings: FactSet (FDS), Michael Baker (BKR), Medifast (MED), Zhongpin (HOGS).

Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index, Import/Export.

Earnings: EnergySolutions (ES), Guess? (GES), rue21 (RUE), Youku.com (YOKU).

Thursday:
Economic:  Weekly Claims (360K), Continuing Claims (3.41M), Empire (15.0), PPI & Core (0.5% & 0.2%), Philly Fed (12.5).

Earnings: Marriott Vacations (VAC), Ross (ROST), TravelCenters (TA), Winnebago (WGO).

Friday:
Economic: CPI & Core (0.4% & 0.2%), IP & CU (0.5% & 78.8%), Michigan (76.0).

Earnings: ReneSola (SOL), Tsakos (TNP).

TECHNICAL OUTLOOK

Figure 1: SP-500 (SPY) Weekly Chart

It might not be perfect, but since completing two Fibonacci-based time cycles of 13 and 21 weeks, bulls have only gained ground of 0.37% over the course of two weeks following a massive 27% run from latter extension’s October lows. What’s more our interpretation of the lengthy time and price gains needing one to three weeks and 3% to 5% of backing and filling has more or less been fulfilled with a pullback of 2.7% happening over a four day spanning the two week period.

What’s also true of this corrective period, which hasn’t been too hard on the eyes of index watchers, besides literally a handful of influential stocks spearheaded by Apple’s (AAPL) largess, it’s been a much less forgiving time for fresh bullish initiations in a much broader base of stocks. That all said, and entering Monday, after a period of consolidation, the opportunity to buy does appear more compelling than in the past couple weeks.

We would caveat accepting the price action as a constructive period destined for higher prices by watching for any closing moves in the SP-500 below 1365. That would mark a second break of 10SMA support and could set up a lower high daily chart formation with the May highs still acting as resistance. Likewise, should the VIX hit fresh lows below 16% and stretch relative to its 10SMA by 15% or greater, the expectation for some less pleasant March Madness would be expected.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• October’s historical bottoms.
• “Best Six” period for market.
• Early Day 3 and late Day 17 FTDs.
• Fib-based Butterfly projection 1400.
• Two week, 2.7% consolidation in SP-500 following 13 and 21 week cycle completions.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Bear market time and price still in effect.
• Historically weak FTD signal.
• 13 and 21-week Fibonacci time cycles complete with SP-500 at test of May highs.
• VIX flirting with pre-May volatility explosion levels.
• Symmetrical butterfly counter-trend pullback.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
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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.