Bulls get back to work Friday after two-plus weeks of technical rest, but do they have a leg to stand on in front of a Greek ultimatum? For the five day period the SP-500 (SPY) is up 2.17% and “flying” higher but looking prone to short-term investor confidence turning complacent.  

THE WEEKLY NUTSHELL

• “Moo-ving Monday.” Out-the-gate profit-taking precipitated by rekindled worries of Greek debt impasse. Weighing in, technical assistance from prior week’s bearish weekly doji in SP-500 and short-term complacency reading in VIX ($VIX) from last Thursday. Second half bullish hammer turnaround for SP-500 after successful test and hold of 1300 level and neutralized sentiment as VIX moves from low of 16.80% Thursday to 20.30% and above 10SMA. Premium merger deals of about 25% for Pep Boys (PBY) and Thomas & Betts (TNB). On economic front, December Income & Spending data comes in mixed with 0.5% vs. 0.4%, 0.0 vs. 0.1% and in-line 0.2% PCE. SP-500 finishes off 0.25%.
• “Tenuous Tuesday.” Out-the-gate upside gap and confirmation of Monday’s bullish SP-500 hammer finds investors challenging themselves with modest closing loss of 0.05%. Early support courtesy of reinvigorated overseas bid in equities and EUR/USD on unconfirmed but optimistic speculations regarding progress between Greece and its creditors. Intraday backing and filling made possible by failure of actual update on Greek situation to be produced, mixed-to-weak economic data from Case Shiller, Chicago PMI, consumer confidence and similar disappointing results from corporate confessionals with ExxonMobil (XOM) and its in-line results weighing on the Dow as shares fall 2.05%.
• “Wins-Day for Bulls.” Following Tuesday’s hesitation bulls manage to move higher by 0.77% to confirm the SP-500’s test of 1300. Bulls are persuaded by mixed but well-promoted global PMI data out of the Eurozone and China showing mostly “good enough” incremental improvements within various contraction and expansion readings. Successful debt offering from “at risk” Portugal eases credit market concerns, as does some IMF / Greece chatter within ongoing debt talks. ADP’s sneak peek at Friday’s BLS jobs data comes in below forecasts with private jobs expansion of 170,000 versus Street’s 200,000, ISM increases by a point to 54.1 but falls shy of 54.5 estimate, but construction spending jumps by stronger-than-expected 1.5% compared to views of 0.4%. Whirpool (WHR), Seagate (STX) and Broadcom (BRCM) help muscle indices higher with better-than-expected and well-received corporate confessionals, while Amazon (AMZN) comes under “Fire” with its light revenues and weak forecast.
• “Doji Thursday.” Edgy tight gainer of 0.11% contained to inside doji close comes in front of Friday’s BLS data and “Bear-nankeSpeak” before House Budget Committee stating US economy remains vulnerable to shocks due to sluggish expansion. For the bulls, same-store-sales for January (COST, TGT) come in mixed but with bullish outlook teaser, mostly strong corporate confessionals (CMI, MA, QCOM) and strong bullish reactions, weaker-than-forecast weekly claims of 367K prove pleasing and unresolved debt negotiations in Greece remain quiet.
• “Back-to-Work Friday.” Bulls score breakout gainer of 1.46% from two-week lateral range following much better-than-expected BLS January jobs report. Nonfarm payrolls jump 243K versus 150K estimates, private jobs increase 257K compared to 168K forecast and unemployment dips to 8.3% versus flat 8.5% consensus call. ISM Services also pleases intraday with 56.8 reading which bests 53.1 estimate and December’s 52.6 result. NASDAQ leads the way with gainer to fresh 11-year highs on the back of supportive confessionals from Gilead (GILD), Silicon Motion (SIMO), Trimble (TRMB), Microchip (MCHP) and Digital River (DRIV). VIX ($VIX) closes down nearly 5% at 17.1% after hitting fresh relative lows of 16.1% and generating a stretchy and nearly complacent 13% differential vs. 10SMA.
  
  

WEEKLY CALENDAR OF KEY UPCOMING EVENTS

Monday:
Economic: Ongoing wild card credit market drivers including unresolved debt plan for Greece which faces deadline with EU Monday.

Earnings: Changyou.com (CYOU), Hasbro (HAS), Humana (HUM), Rangold (GOLD), Sohu (SOHU), UDR (UDR).

After Hours: Anadarko (APC), Coinstar (CSTR), IDEX (IEX), NCR (NCR), Sunoco (SUN), YUM! Brands (YUM).

Tuesday:
Economic:  Consumer Credit ($8.5B).

Earnings: AGCO (AGCO), ArcelorMittal (MT), BP (BP), Coke (KO), Emerson (EMR), Perrigo (PRGO), SolarWinds (SWI), Toyota (TM), UBS (UBS), Vishay (VSH).

After Hours: Buffalo Wings (BWLD), CBR Ellis (CBG), Cerner (CERN), Hartford (HIG), Life Tech (LIFE), Panera (PNRA), Ralcorp (RAH), Silicon Graphics (SGI), Disney (DIS), Western Union (WU).

Wednesday:
Economic:  Weekly Crude, MBA Mortgage Index.

Earnings: Agrium (AGU), “Bud” (BUD), Cognizant (CTSH), Computer Sciences (CSC), Ingersoll Rand (IR), ICE (ICE), CVS (CVS), Polo (RL), Sprint (S), Time Warner (TWX), Wyndham (WYN).

After Hours: Akamai (AKAM), Cisco (CSCO), Covanta (CVA), FMC (FMC), Gen Cable (BGC), Groupon (GRPN), News Corp (NWSA), O’Reilly (ORLY), Prudential (PRU), Visa (V), Whole Foods (WFM).

Thursday:
Economic:  Weekly Claims (370K), Continuing Claims (3.47M), Wholesale Inventories (0.4%).

Earnings: Bunge (BG), CBOE (CBOE), Corn Products (CPO), Group 1 (GPI), Noble Energy (NBL), Pepsi (PEP), Philip Morris (PM), Sealed Air (SEE), Sirius (SIRI), Teradata (TDC), Reuters (TRI).

After Hours: Activision (ATVI), Amkor (AMKR), Cameco (CCJ), Expedia (EXPE), Nuance (NUAN), Republic Services (RSG), True Religion (TRLG), XL Capital (XL).

Friday:
Economic: Michigan (74.0), Trade Balance (-$48.2B), Treasury Budget (-$40.0B).

Earnings: Alcatel-Lucent (ALU), AllianceBernstein (AB), Arch Coal (ACI), Brookfield (BPO), FLIR (FLIR), LyondellBasell (LYB), NYSE Euronext (NYX), PPL (PPL).

TECHNICAL OUTLOOK

Figure 1: SP-500 (SPY) Weekly Chart

Further testing and a successful hammer hold of 1300 this past Monday set the stage for Friday’s successful breakout in the SP-500 to fresh intermediate highs from a fairly tight, 2% wide lateral range of two one-half weeks in length and circled in yellow in Figure 1. We continue to have our directional focus on a Fibonacci-based weekly butterfly and an objective of 1400 into April. With the NASDAQ leading the majors to its own fresh 11-year highs, this objective seems all the more reasonable.

The technical caveat at this point and as has been the case over the past couple weeks, would be to keep the VIX ($VIX) in mind when considering breakouts versus waiting on constructive pullbacks. This past week allowed bulls the opportunity to participate in the former with stronger odds of successful positioning and as we discussed during the week in our daily Wall Street Lunch Option columns. On the other hand, Friday’s breakout courtesy of a percentage gap eating up the bulk of the day’s gains and VIX hitting fresh relative lows last seen in July while pushing 13% below its 10SMA; makes for a trickier short-term entry for bulls.

MARKET LAB
Bullish Technicals

• First Week Effect 2012.
• October’s historical bottoms.
• “Best Six” period for market.
• VIX into normalized range in mid to high teens.
• Early Day 3 and late Day 17 FTDs.
• Two and one-half week breakout from lateral consolidation and 1300 hold.
• Fib-based Butterfly, bullish projection into completion above prior 2011 highs.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl.
• H & S weekly top SPY and trendline breakdown.
• Bear market time and price still in effect.
• Fresh lows in VIX last seen in July with “stretchy” 13% reading.

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.