Weak payrolls data establishes a less-than-good Friday and likely, taxing profit-taking come Monday. For the four day period the SP-500 (SPY) is off 0.74% in a less foolish weekly start to April following an “early and truly” best six run for bulls.  

THE WEEKLY NUTSHELL 

• “Manufactured Lipstick for Bulls Monday.” Strong leading and influential gains of 3.18% and fresh closing highs for Apple (AAPL) on price target call of $1,001 from boutique Topeka Capital, a friendly $23.25 premium bid by France’s Coty for beauty rival Avon (AVP) and slug of mixed Asian, European and US reports on manufacturing extend a less-than-mad March into April with the SP-500 gaining 0.75% to fresh intermediate highs.
• “Somewhat Taxing Tuesday for Bulls.” Pre-FOMC Minutes jitters and rising Spanish and Italian credit spreads tax Monday’s cheerful quarterly start with profit-taking. Hawkish and anti-Bullnanke contrast within Fed’s minutes show pent up confidence of QE3 program as misguided. Report sends market down to session lows and nearly down 1.0% before rebounding in final hour to close off a rattled 0.40% in upper half of inside day trading range.
• “Wins-Day for Bears.” Third and closing break of 1400 with 1.09% drop in SP-500 sets up more taxing conditions for bulls. Second session of increasing worry over sovereign debt spreads following disappointing auction out of Spain and follow-through from Tuesday’s hawkish minutes release. Assisting, ECB leaves rates unchanged at 1.0% due to persistent inflation. Warning from flash chip outfit Sandisk (SNDK) drags semis (SMH) to 1.78% loss and relative pressure within tech sector. Slight, but in-the-ballpark errors in ADP private payrolls [209K vs. 217K] and ISM Services [56 vs. 56.7] doesn’t help but reports are largely overlooked. For incognito bulls, better-than-expected PMI Services data out of Europe is lost in the shuffle.
• “Bulls Pause in Hoped for “Good” Friday.” SP-500 finishes off narrow 0.06% just below 1400 level with BLS payrolls report on tap despite equities Good Friday observance. Sovereign debt concerns and lingering disappointment over dashed QE3 hopes remain but pushed to the side following back-to-back declines. Assisting bulls, same-store-sales for March prove generally strong (TGT, M, RTH, BBBY), as does 6K drop in weekly claims to dip to 3.34M for continuing claims which reflect “ongoing healing” for labor market according to CNBC.com. Jeffries target lift to $800 for Apple on upcoming “iPanel” television sends shares up 1.5% to fresh all-time-highs.
• Not-So-Good Friday. March BLS payrolls add 120,000 jobs, missing widely Street views of 200,000. Weakest increase in five months spurs analyst chatter of unseasonably warm weather in prior months distorting actual labor market strength. Futures tumble in holiday trade (see technical picture below).

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Digestion of Friday’s disappointing BLS March jobs report. Ongoing Middle East geopolitical / oil stresses and potential wild card credit market drivers out of Europe.

Earnings: Greenbrier (GBX), ENGlobal (ENG).

Tuesday:
Economic:  Wholesale Inventories (0.5%).

Earnings: Supervalu (SVU).
After Hours: Alcoa (AA) kicks off Q1 earnings season. The aluminum giant and Dow constituent is expected to show a loss of ($0.03) compared to last year’s profit of $0.28 per share.

Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index, Import / Export, Fed’s Beige Book.

Earnings: Progressive (PGR), Titan (TITN).

Thursday:
Economic:  Weekly Claims (355K), Continuing Claims (3.35M), PPI & Core (0.3% & 0.2%).

Earnings: Fastenal (FAST), LDK (LDK), Layne Christensen (LAYN), Rite Aid (RAD).

After Hours: Naz’ giant Google (GOOG) is expected to produce earnings of $9.62 per share for bottom-line growth just north of 20%. Technically, shares look to be carving out a massive two-year, ascending base on the weekly chart with resistance of 670 – 680 and support from 550 – 565.

Other: JB Hunt (JBHT).

Friday:
Economic: CPI & Core (0.3% & 0.2%), Michigan (76.1).

Earnings: Infosys (INFY), JPMorgan (JPM), Shaw (SHAW), Wells Fargo (WFC).

TECHNICAL OUTLOOK

Figure 2: SP-500 (SPY) Weekly Chart Topping

Here we go. After three weeks of doji decision candlesticks trying to hold the 1400 in the SP-500, a completed Fibonacci-based butterfly looks to be set into bearish motion entering Monday. Over the past couple weeks we’ve detailed an objective of 1343 – 1371 as a minimum corrective move before and if the market might move higher. Futures as of Friday evening slumped nearly 1.5% on Globex with a low of 1372.50 nearly matching the upper edge of our support band which lines up with the May highs.

Given Monday’s anticipated bearish price gap and 2% of “support zone” risk remaining, we’ll be watching the VIX ($VIX) for a short-term overbought and fearful reaction in conjunction with the 60-Minute chart for determining potential support entries for bulls versus “let’s get this party started” momentum for bears.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• Final month of Best Six Nov – April cycle.
• Anticipated testing of 1343 – 1371.

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 with triple doji high.
• VIX hits 5-year lows with failure of fear signal confirms complacency.
• Failure of Transports (IYT) and small caps (IWM) to confirm rally.
• “Early” Best Six complete from October corrective lows.

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.