Battling games of end of quarter window dressing versus some overdue March Madness collide this week. For the five day period the SP-500 (SPY) is off 0.50% as a weekly Doji suits up for bears below 1400 following a key Fibonacci-based pattern completion.

THE WEEKLY NUTSHELL

• “iPayVer$2.65 Monday for Bulls.” March Madness evades bulls again as SP-500 finishes up 0.40% despite prior week’s massive 4.53% gain. Surprise first-ever quarterly dividend news of Apple (AAPL) paying $2.65 quarterly later this year and $10.0B buyback program is well-received by investors despite potential hint of slower organic growth as company pledges to continue its brawny investments while peeling off some its hoard of enviable cash. Anchor Bankers (XLF, BAC and JPM) also assist in bulls resistance to profit-taking as group finishes up 0.60% despite lack of catalyst. NAHB index misses with match of prior period’s downwardly-revised 28.0 reading versus forecasts of 31.0. VIX ($VIX)finishes up fractionally near 15% as short-term complacency reading from last week is worked off in orderly manner despite also striking multi-year lows.
• “Tuesday’s Class of Profit-Taking 101.” SP-500 finishes off 0.30% in confirming overbought [RSI13] market with topping candle, but cuts intraday losses by more than half. Goading bulls into modest profit-taking, global growth concerns as China announces it will increase fuel prices for a second time in 2012 while its steel industry cites reduced production due to weaker demand. Helping bulls keep it constructive, early weakness in Apple turns into the green delicious varietal with shares finishing up 0.81% at new record highs. Financials lead as a sector for a second day as BofA (BAC) announces it isn’t looking to dilute shareholder value with a secondary offering following last week’s stress test passing grade. February housing starts miss estimates and fall from upwardly-revised 706K to 698K versus forecasts of 705K. Permits however jump by much stronger 35K to 717K and well above 695K estimate.
• “Zone Defense Wednesday for Bulls.” Very modest and far from March Madness style profit-taking contained to inside candle pressure of 0.19% in SP-500 above 1400 level. Bulls mostly shake off BearnankeSpeak in front of Congress which warns of still problematic Eurozone. Existing home sales hit in-line five year high for February. Oracle (ORCL) beats and offers upside Q4 guidance but shares reverse more than 5% from enthusiastic opening bid to close off 2.5%. Black gold (USO) gains 0.57% on surprise inventories drop and renewed geopolitical worries regarding Iran. VIX off nearly 3% but still hovering near five year lows of 15% as bulls continue to construct “this time it’s different” optimism.
• “Manufactured Disappointment Thursday.” SP-500 slides 0.72% for third straight, albeit still modest session of profit-taking and taking out key zone defensive line of 1400. PMI manufacturing reports out of China and Eurozone weaken within contraction territory slightly below 50 causing bulls to consider a more cautious stance with the “r” word i.e. recession. Stateside, weekly claims beat of 348,000 representing multi-year lows takes a backseat as does FedEx (FDX) beat and upside guidance as shares fail to “handle” report constructively with technical damage of 3.46%. 20-Yr (TLT) displays some rotation out of risky assets with 0.35% gainer back above 200SMA and further confirmation of five-month double bottom pattern.
• “Zone Offense Rebound Below 1400.” SP-500 gains 0.31% after three day pullback as bargain-hunters come off the bench to attack 1400 level in light news session. Black gold outperforms with 1.37% confirmation of technical support on fresh Iranian pledge to tighten its spigot on supplies. Nike (NKE) sprints lower by 3.22% but rebounds off test of 50SMA after athletics giant tops bottom and top-line forecasts in profit-taking reaction. Apple loses its zone defense line of $600 and finishes off 0.55% after fabricated 9% Apple Turnover plunge due to BATS system. VIX finishes off about 5% in sub 15%, weekend “turnip squeezing” theta position.

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Pending Home Sales (0.5%). Ongoing Middle East geopolitical / oil stresses and potential wild card credit market drivers out of Europe.

Earnings: Apollo (APOL).

Tuesday:
Economic:  Case Shiller (-3.8%), Consumer Confidence (70.0).

Earnings: Lennar (LEN), McCormick (MKC), Walgreens (WAG).

After Hours: Oxford (OXM), PVH (PVH), Synnex (SNX).

Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index, Durable Orders (2.5% & 1.0% ex transports).

Earnings: Commercial Metals (CMC), Family Dollar (FDO), Lindsay (LNN), Teavana (TEA).

After Hours: Mosaic (MOS), Paychex (PAYX), Red Hat (RHT), Texas Ind (TXI).

Thursday:
Economic:  Weekly Claims (350K), Continuing Claims (3.38M), GDP Q4 3^rd Est. (3.0%, 0.9% deflator).

Earnings: Best Buy (BBY), Shaw (SHAW), Worthington (WOR).

After Hours: RIM (RIMM), TIBCO (TIBX), Xyratex (XRTX).

Friday:
Economic: Income & Spend (0.4% & 0.6%), PCE Prices Core (0.1%), Chicago PMI (62), Michigan (74.3).

Earnings: Finish Line (FINL).

TECHNICAL OUTLOOK

Figure 2: SP-500 (SPY) Weekly Chart

Entering the week, a contest between end-of-quarter window dressing bulls and an overdue game of March Madness championed by bears looks to be facing the broader market. As noted during this past week in the Market Barometer, we see the odds favoring bears at this juncture, but without becoming too grizzly in our forecast just yet.

Looking above to the weekly chart of the SP-500, the broad market index is flashing a weekly doji decision candle. While this candle’s price resolution could be to the upside, as it comes following a potential completion of a Fib-based butterfly set around the 1400, an early and truly “Best Six” period which began with early October’s corrective lows and with bullish sentiment ($VIX) at five year lows coupled with recent complacency readings; it’s our technical opinion a pullback of 3% to 5% or test of 1343 – 1371 is much likelier to occur before any fresh rebound and offensive attacks from bulls.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• October’s historical bottoms.
• Nearing final month of Best Six Nov – April cycle.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Bear market time and price still in effect.
• Historically weak FTD signal.
• Fibonacci based butterfly completion around test of 1400.
• VIX hits 5-year lows and recent short-term complacency signal.
• Failure of Transports (IYT) and small caps (IWM) to confirm rally.

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.