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Market Barometer: April 26, 2012

By Chris Tyler, Optionetics.com | Thu April 26, 2012 7:10AM PT


MARKET ANALYSIS 

The iShares Bull ETF and Bullnanke stimulate investors to follow-through Wednesday. For the three day period the SP-500 (SPY) is up 1.74% and after eleven days, signaling the benefit of the doubt gets cautiously passed to the bull camp.

Highlights for bulls eyeing and confirming a FTD:  

  • iShares Bull ETF (AAPL) 13.5% correction followed by massive and well-received earnings blowout.
  • Bullnanke hints at stronger chance for stimulus by policymakers.
  • Generally good confessionals (DHI, MMM, T).
  • “Day 11” FTD signal for market.

Highlights for bearing in mind and prepping for the Worst Six:  

  • Weak global PMI data from China and Eurozone Monday.
  • Political upheavals in-the-making for France and Netherlands and raising fiscal budgetary worries for bulls.
  • Wal-Mart (WMT) Mexico scandal leaves shares deeply discounted.
  • Fed policymakers turn more hawkish.
  • Technical daily bear flag still intact following weekly butterfly top for SP-500.

Technicals

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

On Wednesday, the SP-500, along with and led by the iShares Bull ETF or umm, Apple and the Naz’, confirmed a bullish follow-through day signal on Day 11 of the rally attempt. Technically, no major intermediate rally has occurred without this event in place. That’s the good news.

The bad news for bulls is a signal doesn’t bar the FTD from sometimes failing to cooperate. Given the weekly view of a market that’s already run a well-documented technical course in front of the seasonal weak “Worst Six” calendar period and one which still maintains a bearish flag below 1400; we’re less willing to be gung-ho about this particular FTD’s future prospects. Currently and until proven otherwise, maybe with a second FTD style signal through 1400, we'll opt instead for a bit of Swiss or hedgehog-minded neutral commitment with options.

MARKET LAB
Bullish Technicals

  • First Week Effect 2012.
  • Final weeks of official “Best Six” calendar cycle.
  • Recent fearful VIX trifecta signal as SP-500 tests key 1343 – 1371 zone.
  • FTD signal this week for bullish trend change per IBD.

Bearish Technicals

  • 1930 Bear Market Rally repeat states EW Intl.
  • Bear market time and price labels still in effect for some.
  • Fibonacci-based butterfly into 1400 potentially completes.
  • “Early and truly Best Six” period from October lows in place.
  • Failure of Transports (IYT) to confirm, as well as small caps (IWM).
  • SP-500 bear flag to compliment weekly butterfly top as market approaches seasonal Worst Six period.

RADAR WATCH

We’re removing the iShares Bull ETF (AAPL) from the Bears Radar below after posting it last week with shares still toiling around $600. The initiation was prior to a move in shares down to a low of $555 immediately in front of its report and one which allowed for easy adjustments and / or exits for the likes of favored strategies like a mused OTM bear call vertical. The moral of the story here is never to look a gift horse in the mouth…especially with a red apple in hand.

Given the broader market’s FTD, action in VMware (VMW) and Baidu (BIDU) have unfortunately proven technically unworthy of maintaining long delta positions in our opinion. VMware has had opportunities for profitable adjustments over a handful of weeks, but a more recently selected Baidu has simply disappointed in its failure to first breakout from a weekly lateral consolidation and subsequently, break pattern support following downside earnings guidance.

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

Company

Symbol

 Sector

Earn.

Tracked

  Pattern

Strategy

Molycorp

(MCP)

Metals

5.10

7.27

Weekly Up

D-Collar

Cheniere

(LNG)

Nat Gas

May

4.5.12

First Base

D-Collar

Table 1: Bull Watch list

Non-Directional

Company

Symbol

Sector

Earn.

Tracked

Strategy

Silver ETF

(SLV)

Silver

NA

12.21

Long Strangle

Table 2: Basing Watch list

The Bears

Company

Symbol

Sector

Earn.

Tracked

  Pattern

Strategy

SP-500

(SPY)

Market

NA

3.22

Butterfly

Adjusted OTM Put

Caterpillar

(CAT)

Machines

4.25

3.29

Double Top

OTM Put

Table 3: Bear Watch list
 

 

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

 

 

 


Recent articles by Chris Tyler, Optionetics.com


September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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