Back in play credit market risks, the FOMC and one large basket of earnings with Apple’s Tuesday night centerpiece have bulls’ attention with good reason. For the five day period the SP-500 (SPY) is up 0.60% but April’s “Best Six” bull looks to have expired sans a key follow-through day in the week ahead.

THE WEEKLY NUTSHELL

• “A Varied Mix Monday.” Dow up, Naz’ down and flat SP-500 delivers a little something for bears, bulls and hedge hogs. Positive open bias on Chinese policymakers loosening currency and better-than-forecast retail sales gain of 0.8% versus 0.5% estimate loses its broad-based grip intraday. Profit-taking in Naz’ and SP-500 courtesy of kingpins Apple (AAPL), Google (GOOG), Amazon (AMZN) and Priceline (PCLN), as well as fresh, unwanted highs in sovereign debt yields. Dow finishes up 0.56% on the back of Caterpillar (CAT) upgrade to “Buy” from Longbow and strength in financials (JPM, BAC) following well-received earnings miss from peer Citigroup (C). On officially-sanctioned front, Empire survey misses by wide margin with reading of 6.6 versus 17.5, while the Housing Market Index falls three points to 25 compared to forecasts of one point gain to 29.
• “Somewhat Terrific Tuesday.” Easing sovereign debt anxieties following two well-bid Spanish note auctions bring credit yields off record levels. IMF upward revision to its global growth forecast from 3.3% to 3.5%, upbeat German economic sentiment survey, well-received but mixed corporate confessionals from financial heavyweights (STT, NTRS and USB) and one very green “iShares Bull ETF” i.e. Apple (AAPL) following a five-day correction, stoke the SP-500 to lighter volume gains of 1.55% which clear 50SMA resistance but fail to signal bullish FTD on Day 5 of rally. Dismissed or simply dissed, Goldman (GS) posts top and bottom-line beat but Volcker Rule, cryptic buyback response and looming potential two notch credit cut from Moody’s send shares off 0.80%. Housing starts disappoint with weaker-than-forecast 654K units compared to 700K consensus, but permits take up the slack with beefier 747K increase versus 710K. Industrial production misses with flat result for March versus 0.2% Street view.
• “Day 6 versus Bear Flag Wednesday.” SP-500 finishes off 0.41% in narrow inside trade as bulls and bears continue to bide their time respectively. Keeping a lid on prices, profit-taking in Dow and tech giants Intel (INTC) and IBM (IBM) following mixed results with emphasis on picking apart reports for weak items like margin concerns and very modest revenue miss respectively. Concerns over Spain’s financial health are rekindled after 13 of the country’s banks apply for reorganization.
• “Disturbing Thursday.” SP-500 finishes off 0.59% in lower half of session’s trading range and below 50SMA on menacing distribution. Worries of ongoing sovereign debt issues despite successful note auctions out of Spain and rumors of imminent downgrade to France’s –AAA credit rattle bulls from overseas, while weak and disappointing results from from Philly Fed, weekly claims and existing homes offer a supportive bearish shake from stateside. Corporate confessionals (FFIV, VMW, TRV and BTU) come in generally better-than-expected with decent investor reaction spearheaded by eBay’s (EBAY) 13.24% gain following its top and bottom-line beat.
• “Friday’s Expired Bull.” Out-the-gate, beefy “McSofty” (MCD, MSFT) corporate serving delights bulls. Initial cheer for wave of decent quarterly confessionals (GE, COF, SLB, UA and HON) is largely dropped by Expiration Friday’s closing bell with mostly flat inside candle gain of 0.12% and finish at 50SMA on day eight of rally count and the other trader’s bearish flag. Delightful IFO business climate data out of Germany shows surprise, but ultra-modest sentiment improvement for April assists in first half market bid. Keeping the lid on bulls, non-gravity defying pressure of -2.46% for iShares Bull ETF (AAPL) and mini, second tier tech wreck (SNDK, ALTR and RVBD) of sorts puts Naz’ into positional test of 3,000 level.

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Credit watch / yield risks tied to Eurozone and wildcard of ongoing Middle East geopolitical / oil stresses.

Earnings: Conoco (COP), Check Point (CHKP), DR Horton (DHI), Easton (ETN), Hasbro (HAS), SunTrust (STI), Xerox (XRX).

After Hours: Netflix (NFLX), Texas Instruments (TXN), Illumina (ILMN), Canadian Rail (CNI), Crane (CR), Rent-A-Center (RCII), STMicro (STM).

Tuesday:
Economic:  Case-Shiller (-3.4%), Consumer Confidence (69.5), New Home Sales (320K), FHFA Housing Price Index.

Earnings: 3M (MMM), Air Prods (APD), AT&T (T), Baker Hughes (BHI), Coach (COH), Illinois Tool (ITW), Parker H (PH), R’ Shack (RSH), Regions (RF), Sigma A (SIAL), US Steel (X), Western U (WU).

After Hours: The iShares Bull ETF i.e. Apple (AAPL), with its roughly 4.5% weighting in the SP-500 and 13% of the Naz’ is expected to produce profits of $10.05 compared to its year ago earnings of $6.40. Technically, shares have corrected 11.50% from last week’s all-time-highs following YTD run of 55%.

Other: Baidu (BIDU), Buffalo Wings (BWLD), CH Robinson (CHRW), CBRE (CBI), FMC (FTI), iRobot (IRBT), Juniper (JNPR), Panera (PNRA), Questor (QCOR), Wipro (WIT).

Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index, FOMC Decision (0.25%).

Earnings: Alleghany (ATI), Boeing (BA), Cat (CAT), Corning (GLW), Delta (DAL), Harley (HOG), Ericsson (ERIC), NASDAQ (NDAQ), SAP (SAP), Southern (SO), Sprint (S), United Micro (UMC), WellPoint (WLP).

After Hours: Akamai (AKAM), Cirrus Logic (CRUS), Citrix (CTXS), Cliffs (CLF), Crocs (CROX), Goldcorp (GG), KBR (KBR), LV Sands (LVS), O’Reilly (ORLY), Rock-Tenn (RKT), Tractor Sup (TSCO).

Thursday:
Economic:  Weekly Claims (373K), Continuing Claims (3.30M), Pending Homes (0.5%).

Earnings: Aetna (AET), Alcatel (ALU), A’Bergin (ABC), Avnet (AVT), Borg W (BWA), Bunge (BG), Deutsche (DB), Dow Chem (DOW), Celgene (CELG), Exxon (XOM), Kellogg (K), Pepsi (PEP), Safeway (SWY), Taiwan Semi (TSM), Time Warner (TWC), United C (UAL), UPS (UPS), Whirlpool (WHR).

After Hours: Agnico (AEM), Amazon (AMZN), Deckers (DECK), Gilead (GILD), KLA-Tencor (KLAC), NXP Semi (NXPI), Principal Fin (PFG), Skyworks (SWKS), Starbucks (SBUX), Western Digital (WDC), Zynga (ZNGA).

Friday:
Economic: GDP Q1 Adv. (2.6%, Deflator 2.2%), Michigan (75.7).

Earnings: Autoliv (ALV), Chevron (CVX), Coventry (CVH), Ford (F), Goodyear (GT), Intl Paper (IP), Merck (MRK), Rubbermaid (NWL), Newmont (NEM), Procter & Gamble (PG), Total SA (TOT), VF Corp (VFC).

TECHNICAL OUTLOOK

Figure 1: SP-500 (SPY) Weekly Chart Topping

The past five period produced an inside candle weekly gainer of 0.60% for the SP-500 which also did a good job of holding the 1370 level and upper boundary of a key support band from 1343 – 1371. That said and as we’ve addressed during the past week, the benefit of the doubt still sides with the bears following an “early and truly” Best Six calendar run from October’s corrective lows into a weekly Fibonacci-based butterfly top. What would improve our outlook to see the current correction in the market as sufficient to produce a run at higher prices? The answer lies with a high-powered follow-through day or FTD signal.

This past Tuesday’s percentage gains were strong enough on a price basis to generate a FTD, but failed on the volume criteria due to lower levels in the major indices compared to the prior session. This leaves the market outside of the classic rally attempt window of days 4 through 7 as Monday marks day 9, but within an acceptable range of 13 days based on historical studies of this defining technical event for intermediate bulls. Until and if that day comes, given an approaching “Worst Six” period, price and time still appear to favor market bears, if not option hedge hogs at a minimum.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• Final couple weeks of “Best Six” calendar bias.
• Mid-level testing of 1343 – 1371 with fearful VIX signaling during recent lows.
• Watch for FTD signal this week as bullish event.

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.
• Failure of Transports (IYT) and small caps (IWM) to confirm rally.
• “Early” Best Six complete from October corrective lows.
• SP-500 bearish flag complimenting butterfly top into Worst Six period.

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.