MARKET ANALYSIS 

A taxing Fed and reignited credit market jitters challenges Bullnanke’s free throw line of 1400. For the three day period and counting, the SP-500 (SPY) is off 1.65% in early Thursday trade as the bears suit up for a third day and a less foolish start to April.

Highlights for bulls maintaining a zone defense above “SP-1400!”

• Apple (AAPL) striking fresh highs Monday with gains of 3.18% with boutique shop’s price target of $1,001…need we say more?
• Extension of overseas credit market breather into Monday.
• France’s Coty announces friendly premium bid for Avon (AVP).
• Mixed global PMI reports are manufactured into bullish support led by stateside beat.
• Better-than-expected PMI Services data out of Eurozone Wednesday.

Highlights for bears taxing bulls below “SP-1400!”: 

• Reignited Eurozone headaches as credit spreads widen Tuesday.
• Weak auction from Spain sees increased selling pressure Wednesday.
• None-too-impressive and mixed global PMI data.
• Hawkish FOMC Minutes crushes prior week’s Bullnanke QE3 innuendos.
• Sandisk (SNDK) warning weighs on tech and semis (SMH).
• ADP miss of 209K in private payrolls vs. 217K estimate sets up BLS jobs miss.
• Recent confirmed Fly and SP-1400 and complacent VIX at five year lows.

Technicals

Figure 1: SP-500 ($SPX) Weekly Chart

Will a third attempt prove the charm? The technical reference is to a hibernating bear looking to awaken with Wednesday’s third break of the 1400 level as an early signal the next pullback in the broader market will prove to be less simple and more taxing for bulls.

Given the view in Figure 1 which shows a couple weekly doji decision bars developed around this key numerical level after a potential completion of a well-discussed Fibonacci-based butterfly pattern; we see the increased risk of downside momentum picking up rather than the increasingly popular fear of missing out.

Looking forward, we continue to see an estimated test of 1343 – 1371 as a minimum price target for some backing and filling, which could ultimately lead to a full-blown correction, before and if, higher prices might be achieved.  

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• One month of “Best Six” calendar cycle still ahead.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• Bear market time and price labels still in effect for some.
• Historically weak FTD.
• VIX just off five year lows with no fear signals generated.
• Fibonacci-based butterfly into 1400 potentially completes.
• Into final month of “Best Six” period, but after an already spectacular six month run from October lows.
• Failure of Transports (IYT) to confirm, as well as small caps (IWM).

RADAR WATCH

In the past week, both Molycorp (MCP) and Vmware (VMW) have done well to notch fresh highs and opportunities to adjust existing long delta positions like our mused dynamic collar and vertical.

The former strategy generally rests on accumulating long stock sparingly on bearish moves and letting go of inventory and rolling up strikes during more pleasant price runs.

The latter vertical position, while the same in its risk structure to start is often best squared away by lightening up the overall position, rolling up the strikes and / or tightening the strikes or selling a vertical against the position to form a legged butterfly or long call condor.  

Fresh to the screens below, we’re adding potential up-and-comer Cheniere Energy (LNG) as a potential bullish collar candidate. Shares are quite volatile statistically, while technically speaking, the name is carving out its first plus $15 base which is taken as a bullish sign. One point strikes and decent enough liquidity provision in its quoted markets look to round out what we see as a good starting basis for this type position.

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 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.