Note: While Tom is on vacation for the next couple of weeks, his Weekly Outlook will be covered by Optionetics' Chris Tyler.

Fresh quarterly inflows and patriotic biases are no match for July's early "sell-a-bration" as green shoots efforts get questioned once more courtesy of Thursday's weak monthly jobs data. For the four-day period, the S&P500 (SPY) is off 2.21% and nearing a key technical test other than "SP-900!"

THE WEEKLY NUTSHELL

• "Good Mao-ning" for bulls to kick off week. Report of China beefing up oil reserves by 160% lends itself to green shoots optimism. Black Gold (USO) and energy complex (OIH, XLE) find an appreciative bid. Chinese officials reassure market they're buyers of US treasuries (TLT), helping lift bond prices / lower yields to monthly lows and support equities in process. End of quarter window dressing bias lurking.
• "Turnaround Tuesday" after feeble out-the-gate green shoots / window dressing efforts by bulls. Mixed data from S&P Case / Shiller and Chicago PMI and disappointing read on consumer confidence / expectations index stop early bid in its tracks. Schnitzer Steel (SCHN) gets "schnitzeled" on earnings miss impacting industrial metals along with stronger Greenback.
• Unofficial "Hump Day" for bulls Wednesday. Market closes fractionally higher but well-removed from out-the-gate celebrations courtesy of fresh quarterly funds and patriotic bias hoopla. Weighing in on the parade, bulls rethink mostly uninspiring-to-disappointing slug of economic data. ADP miss / 473K decline, in-line but contracting ISM, tepid 0.1% ending home sales match and construction spending misses with drop of 0.9%. Black Gold reverses to close lower in bearish engulfing despite "bullish" sounding, but not necessarily, inventory drawdown.
• "Terribull Thursday" as bearish gap and crap action for S&P500 reunites bulls with the less-coveted 900 level. Spearheading the misfiring "sell-e-bration", monthly jobs data misses by wide margin. Actual losses of 465K leave bulls more than questioning prospects and time needed for those green shoots efforts to bear actual fruit. Weekly claims and continuing data mostly in-line and still emphasizing weak labor market. Better-than-expected factory data (0.9% increase) gets rightfully lost as bulls stampede for the exits.

ON TAP THIS WEEK

Last week was the abbreviated workweek but the incoming five day period has much less in the way of officially-sanctioned economic and earnings catalysts. That could work to the bulls advantage in certain situations. In the current environment though, with green shoots momentum clearly losing its edge, the market is more likely to succumb to the effects of gravity, rather than producing a late fireworks show for bulls.

At this stage, bulls are in need of some hard evidence the economy is rebounding and not just removing itself from the March abyss. The latest jobs data or lack thereof is certainly not supporting that case. Realistically, it's presenting the likelihood of bulls having been too optimistic in their role as market discounters.

On tap, aluminum heavyweight and Dow component Alcoa (AA) kicks off the Q2 earnings season Wednesday night. The one-time economic bellwether is expected to report a substantial loss of $0.34 per share but less than last quarter's $0.60.

In truth, many analysts now view the company's comings and goings as much less relevant to the economy and more about cost cutting story and an indicator of the price of aluminum. However, as first in line for corporate confessionals, traders can rest assured earnings will begin to play an increasingly important role in whether the market can be called a bull or bear. So, on that front-let the games begin.

Weekly Calendar of Key Reports
Monday:
Economic ISM Services (46.0), Obama in Russia through Wednesday
Earnings China Medical (CMED)
Tuesday:
Economic NA
Earnings Greenbrier (GBX), Ruby Tuesday (RT)
Wednesday:
Economic Weekly Crude, Consumer Credit (-$7.5B)
Earnings Family Dollar (FDO), Pepsi Bottling (PBG), Alcoa (AA)
Thursday:
Economic Weekly Claims, Wholesale Inventories (-1.0%), G-8 Meeting Italy
Earnings 3Com (COMS), Chattem (CHTT), Helen of Troy (HELE), FCStone (FCSX), Infosys (INFY), Shaw Group (SGR)
Friday:
Economic Import / Export, Trade Balance (-$30.0B), Michigan (71.0)
Earnings Progressive (PGR)

TECHNICAL PICTURE


Figure 1: S&P500 (SPY) Daily Head & Shoulder


A hat tip for this market strategist's correct assessment of key pattern resistance coming into play versus a more bovine-inspired reality. Anticipating a playable reversal near 93 - 93.30 as part of a right shoulder pivot turned prescient with the S&P500's (SPY) high of 93.23 defining a "now" well-constructed Head & Shoulder pattern nearing its neckline.

It might be added, with the ensuing hard gap and crap action on Thursday-positioning short and / or laying off the bullish delta into overhead resistance, was a much more pleasant way for bulls (and bears) to enjoy fireworks outside the market.

Entering Monday, the market as represented by the S&P500 is around that "key, key" 900 level. The problem now is the lows two week's back pierced the coveted support by about 1.25%. With that said, the expectation is a retest of those lows is likely with some follow-through to test the mid-to-late lows just above 88.

Should further testing enter the picture, the market will be oversold short-term and be monitored for a couple "buy the dip" opportunities as a decent-sized correction within a coined "Wild Bore" market unfolds. In saying that though, with the pattern high in place, overall below average volume and a hold within 0.75% of the May pivots is important if traders are looking for a playable bounce.

Personally, the expectation is a low will be found around 88 and a return move back towards 90 should play out. But, with a conservative measured move estimated at 83 in the SPY based on the Head & Shoulder top-attention to "selling the rip", if the bull attempts to take a strong stab at bargain-hunting, seems to still have more going for it than the stuff made from green shoots.

MARKET LAB

Bullish Technicals

• Historic corrective low.
• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Corrective uptrend intact with recent lows.
• Trend support near 88.

Bearish Technicals

• Technically, "lower highs" weekly still in place DIA from Sept 2008.
• First 100 Days cycle & "Best Six Months" complete.
• Historically low insider buying vs. selling.
• Key weekly resistance for S&P500 in place after historic run.
• Breakdowns of technical support in green shoots commodity arena.
• Head & Shoulder topping SPY nearing neckline breakdown.

Chris Tyler
Senior Staff Writer & Options Strategist
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.