Note: Tom is on vacation, so this week's Weekly Outlook was covered by Optionetics' Chris Tyler.

Can heady green shoots efforts in the broader market receive further earnings fuel this week? For the five-day period, the S&P500 (SPY) is up a hefty 6.64% that finds bulls pulling off an “Obama-esque” public works pattern breaker.

THE WEEKLY NUTSHELL 

• Analyst Meredith Whitney causes neckline injury for bears on Monday. Notorious financial bombardier turns bullish on Goldman (GS) and plugs select financials (XLF, BAC). Market registers accumulation in “return move” to H & S neckline. Black Gold (USO) continues to underperform on vacuum concerns of weak economy ahead.
• Tepid but green Tuesday following weak start on a mixed stink of headline shockers. Goldie (GS) blasts views but fails to gain investor appreciation on “Profit-Taking!” dilemma. “Dude, It’s a Sell” at Dell (DELL) with its warning. PPI surprises in a bad sort of way with larger than expected 1.8% jump vs views of 0.9%. Retail sales data comes in mixed but on the rise and inventory data falls by sharper 1.0% and logging 9th straight drop as business’ tighten belts.
• “A chip off the old shoulder” delights bulls on Wednesday. “Chip” giant Intel (INTC) spearheads with better-than-expected results, affording bulls and bears to break bearish H & S pattern in SP-500. American Express (AXP) leads financials higher following strong “trust data.” Mixed economic data. Empire results of -0.55 are best since April 2008. Slighter drop in industrial production is 17th out of 18 and higher CPI but mostly in-line 0.2% rise in core. “Not-so-YUMmy” guidance from YUM! Brands (YUM).
• A “Green Roubini” for bulls on Thursday. Longtime bearish economist Dr. Doom i.e. Nouriel Roubini sparks percentage second half rally after misinterpreted, albeit still bullish for him, comments are made to CNBC. JP Morgan (JPM) blasts views but succumbs to light profit-taking. Nokia (NOK) warns on 2009 industry volume for handsets. “Sell the news” reaction to better-than-expected (but still weak) claims data. Vale (VALE) interest in Mosaic (MOS) sends shares vaulting and places sympathy bid in aggies (CF, IPI, MOO).
• Bulls and bears on pause Friday, while some expire in non-volatile inside doji pattern for SPY. Mixed earnings reports following strong back-to-back gains give incentive to “schnitzel a little.” For the bulls, IBM (IBM) beats and raises. Google (GOOG) is “goog” with beat but succumbs to mild profit-taking. Housing starts and permits lift and beat views. For the bears, Nouriel Roubini wants everyone to know he’s not the bull investors made him out to be on Thursday. GE (GE) and BofA (BAC) both disappoint with weak revenue and “challenging” commentary respectively.

ON TAP THIS WEEK

Earnings, earnings and more earnings. Last week a couple well-received reports from Intel (INTC) and IBM (IBM) spearheaded the green shoots efforts for market bulls as visions of increased business spending were all the rage.

Entering Monday, it’s still early enough in the season for pleasant surprises in a bevy of market titans (CAT, MSFT, WFC, T, UPS, MMM, AMZN, AXP) to be hailed once more as the greatest thing since sliced bread and lift to the broader market as a result. However, and as discussed in the Technical Picture section below, the task of earnings performing a repeat has been made much less likely following last week’s strong market lift.

One bellwether that looks technically extended is Apple (AAPL). Shares are currently facing a potential W5 completion on the daily. Weekly zone resistance in the form of a downtrend line, prior price and a 62% retracement set up an area from 150 – 155 which could find shares establishing a top.

As for Tuesday night’s Apple report, the i-Everything tech giant is expected to earn $1.16 per share versus last year’s $1.19. Investors of course will likely be more concerned with spending habits going forward and management’s color commentary on the matter during its conference call.

Weekly Calendar of Key Reports

Monday
Economic: Leading Indicators (0.5%)
Earnings:  Astec (ASTE), Eaton (ETN), Halliburton (HAL), Hasbro (HAS), Johnson Controls (JCI), Weatherford (WFT), Legg Mason (LM), Texas Inst (TXN), Zions (ZION)

Tuesday
Economic: NA
Earnings: BJ Services (BJS), BlackRock (BLK), Caterpillar (CAT), Continental (CAL), DuPont (DD), Freeport (FCX), Peabody (BTU), Lexmark (LXK), Quest D (DGX), Sherwin W (SHW), Ameritrade (AMTD), UAL (UAUA), United Health (UNH), Apple (AAPL), Gilead (GILD), Linear Tech (LLTC), Nabors (NBR), QLogic (QLGC), Starbucks (SBUX), Stryker (SYK), Yahoo (YHOO)

Wednesday
Economic: Weekly Crude
Earnings: Alleghany Tech (ATI), Boeing (BA), Genzyme (GENZ), Illinois Tool (ITW), Morgan Stanley (MS), US Bancorp (USB), Wells F (WFC), Whirlpool (WHR), Chipotle (CMG), Citrix (CTXS), eBay (EBAY), Intuitive Surgical (ISRG), Mosaic (MOS), Noble (NE), Qualcomm (QCOM), SanDisk (SNDK), Steel Dyn (STLD), Tractor Sup (TSCO), VMware (VMW), Walter (WLT)

Thursday
Economic: Weekly Claims, (540K), Existing Homes (4.80M)
Earnings: 3M (MMM), AT&T (T), Bunge (BG), CME (CME), Danaher (DHR), Ford (F), Hunt. Bank (HBAN), Nucor (NUE), Potash (POT), Safeway (SWY), Starwood (HOT), UPS (UPS), Airgas (ARG), Amazon (AMZN), Amex (AXP), Baidu (BIDU), Broadcom (BRCM), Bucyrus (BUCY), Burlington (BNI), Cap One (COF), Juniper (JNPR), Microsoft (MSFT), Netflix (NFLX), SunPower (SPWRA)

Friday
Economic: Michigan (64.6)
Earnings:   Arch Coal (ACI), Black & Decker (BDK), Fortune B (FO), LM Ericsson (ERIC), Schlumberger (SLB)

TECHNICAL PICTURE   

 

Figure 1: S&P500 (SPY) Daily Overbought

I can’t help but mention the irony of driving out of Portland this weekend for a quickie sailing session in Hood River when two flashing signs notified drivers of “Construction” followed by “No Shoulder Ahead.”

The reference of course is to almost infamous and now debunked H & S pattern in the S&P500. This past week’s rather amazing construction by bulls i.e. upside performance, took out the pattern’s right shoulder with relative ease compliments of Intel (INTC) well-received report on Wednesday.

Entering Monday, the market is extended extended short-term and very prone to backing and filling the next few days at a minimum. The outlook is based on a VIX Stretch signal established Wednesday and year to date lows in the market’s most notorious gauge of complacency (and fear).

Additionally, a swift 78% Fibonacci test, hit of the upper Bollinger and tight inside doji on Friday in the SPY set up a decent spot for a reversal to materialize. There’s also a likely legion of other indicators from the likes of sentimentrader.com which I follow for statistical evidence of market trends.

Net, net and continuing to find a second sprouting of green shoots a bit too optimistic within a coined “wild bore” or range bound market—“schnitzeling a little something” and / or adjusting those deltas into a more balanced or grizzly state sounds about right.

MARKET LAB

Bullish Technicals

• Historic corrective low.
  Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Corrective uptrend intact with recent lows at 9.50%.
• Above the 50 and 200-Day MAs SPY.
• Head & Shoulder pattern negated.
• Weekly Inverse H & S being forged from October lows.

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.
• Bearish VIX Stretch signals Wednesday with volatility index at fresh lows.
• Range bound market in / around resistance plus short-term overbought.

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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