Note: Tom's Market Outlook was covered by Optionetics' Chris Tyler.

The fear of missing out was back in a big way last week as bulls break through key time and price resistance in the S&P500. For the five-day period, the S&P500 (SPY) is up 2.16% on mostly difficult-to-handle conditions preceding one last hurrah for August.

THE WEEKLY NUTSHELL

• An "Opening Hell Monday Mourning" for bulls followed by licking of wounds in ultra-tight intraday trade as market sees worst loss in six weeks. Trifecta of weaker growth of 0.9% from Japan's GDP, continued "red chutes" in Chinese equity markets and Lowe's (LOW) poor report hammers investors. Healthcare (UNH, CI) bucks the broader market as "public option" for healthcare system looks less likely. Report of stronger-than-expected results from Empire index and an extension through March for Fed's TALF fail to find bid from bulls.
• "Tepid Tuesday" as bulls mount light volume technical-based bargain-hunting bid. Home Depot (HD) upside surprise and beefed up forecast and fashionable results from Target (TGT) hit the bulls-eye with investors. Bulls shake off mixed-to-weak PPI results that afford deflation chatter and lower-than-expected housing and permits data.
• Out-the-gate Hump Day gets reversed. Large and surprise crude draw of more than 8.0M barrels fuels black gold (USO) and energy lift (XLE, OIH) to spearhead relative strength for bulls. Bulls "Shanghaied" again, Deere's (DE) lowered guidance and Hewlett's (HPQ) mere reaffirmation help with early losses. Buzz of second stimulus plan (despite denials from 'da Hill and Buffett's NYT's statement of US on its way to slow recovery aid and abet.
• Three-in-a-Row Thursday. Overseas strength courtesy of China's I&CB strong results and Bundesbank lifting recovery outlook to third quarter. Weak weekly falls to better-than-expected Philly and in-line leading indicators, reinforcing "jobless recovery" rally.
• A very good Friday for bulls. Fourth straight session of upside finds heavy volume breakouts for major averages. European PMI results aid bulls' tunnel vision of economic stabilization. Commodities follow suit on increased optimism (OIH, XLE, USO, SLX) and tied at the hip pressure on treasuries (TLT) and Dollar (UUP). Existing home sales of 7.0% beat views with strongest results in two years. BernankeSpeak from economic summit in Jackson Hole receives spa treatment from bulls as "leveling out" and "prospects for a return to growth in the near term appear good" soothe.

ON TAP THIS WEEK

The retail sector will continue to dominate a dwindling list of corporate confessionals this week. Unlike the preceding period though and with names like Lowe's (LOW) and Home Depot (HD) to kick off the earnings procession-the companies reporting are mostly second tier and will be hard-pressed to budge Mr. Market. Spearheading the action during the first half are Staples (SPLS), Dollar Tree (DLTR) and Williams Sonoma (WSM).

In similar fashion, last week offered Dow component and computing giant Hewlett (HPQ) as a headline weapon worthy of forcing bulls to hit the sell key. Not that the action lasted very long, but with this week's highest profile offering being Dell (DELL); it's less likely any "Dude, It's a SELL" spillover will work its way into the market from its announcement.

On the technical radar, one corporate confessional this week that looks interesting is Marvell Tech (MRVL). The semiconductor outfit reports on Thursday evening. Analysts expect $0.14 per share versus last year's $0.24. The drop of about 40% in profits is partly responsible for a poor looking EPS rating of just 18 at IBD. That being said, the stock has demonstrated technical leadership this year off its lows. Further, MRVL has maintained an accumulation rank of "A-" while putting together a flat four week base off its year-to-date highs.

The trio of Black Gold (USO), treasuries (TLT) and the Dollar (UUP) remain important to watch for their impact on the broader market. The Greenback's slide towards its year-to-date lows and oil's quick jump back towards its best levels in two month's aided market bulls' ability to march to fresh highs. By the same token, Friday's slump in treasury prices signaled investor interest in allocating money into equities versus apparently inadequate risk free returns offered in the credit market.

Weekly Calendar of Key Reports
Monday:
Economic NA
Earnings Winn Dixie (WINN)
Tuesday:
Economic S&P Case/Shiller (-16.40%), Consumer Confidence (48.0)
Earnings Big Lots (BIG), Burger King (BKC), Chico's (CHS), Corinthian (COCO), Medtronic (MDT), Staples (SPLS), Blue Coat (BCSI), Dycom (DY), Hain Celestial (HAIN) Intl Rec (IRF) Myriad (MYGN)
Wednesday:
Economic Weekly Crude, Durable Orders (3.2%, 1.0%), New Homes (390K)
Earnings Dollar Tree (DLTR), DSW (DSW), Kirklands (KIRK), Williams Sonoma (WSM), Guess (GES), Sigma Designs (SIGM), TiVo (TIVO), Coldwater Creek (CWTR)
Thursday:
Economic Weekly Claims (565K), Pre Q2 GDP (-1.4%), Deflator (0.2%), Core PCE (2.0%)
Earnings A-Power (APWR), American Eagle (AEO), Energy C (ENER), Fred's (FRED), Conns (CONN), Toll Bros (TOL), Vimpel (VIP), Dell (DELL), J. Crew (JCG), Marvell (MRVL), Novell (NOVL)
Friday:
Economic Inc & Spend (0.1%, 0.2%), PCE Core (0.1%), Michigan (64.8)
Earnings Frontline (FRO), Tiffany (TIF)

TECHNICAL PICTURE


Figure 1: S&P500 (SPY) Weekly Chart

A strong Fibonacci combination consisting of weekly chart 38% resistance and timing runs of five months and five weeks, looked to be a spot where bulls should have exhausted themselves and bowed to the bear camp. Instead, corrective activity measuring less than 4.0% and lasting for less than two sessions was used as a platform for higher prices to close out the week.

All in all, it was a win for the bulls. At the same time most of the week's pin action was difficult to trust with any conviction. The initial "buy the dip" rally was made all the more suspect due to rather meager volume levels during the first three sessions removed from the lows. It wasn't until Friday's expiration-aided price breakout to fresh highs did interest pick up to levels worthy of confirming accumulation by institutional traders.

Entering Monday, my thoughts are "Let buy-gones, be bygones." If you missed getting in on the trend due to technical beliefs like posted above, a more open mind going forward coupled with a protective strategy to watch one's you know what, are likely in order. Much like when the market defied bears and cautious bulls by rallying strongly from July's early Head & Shoulder breakdown-this past week's action defied and effectively voided a potential bearish set up.

Keeping an eye on the VIX for a "stretch differential" in excess of 15% from its 10-Day MA should be one early heads up for traders to guard against a potential top or at least confirm that conditions aren't opportunistic for buying positive deltas. The last time the "VIX Stretch" did signal occurred as a buy indicator for bulls. That was on July 8^th when the spread differential went to 18% intraday. That also happened to mark the lows of the much ballyhooed Head & Shoulders breakdown.

As noted last week, premiums in products like the SPY remain slightly rich relative to the short-term movements of the underlying. More importantly, at "Pre-Lehman" levels, the market entering into the seasonally weak months of September and October and historic gains on the table-if you want to make sure the current trend stays friendly or still want to place a friendly wager against the bull, purchasing an option still deserves our consideration.

MARKET LAB

Bullish Technicals

• Historic corrective low.
• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Above the 50 and 200-Day MAs SPY.
• Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
• Broken 5 month / 5 week cycles and 38% retracement SPY.
• No VIX Stretch to suggest the bull has run its course.

Bearish Technicals

• Reality check "Jobless Recovery!" versus green shoots pricing?
• Potential W5 Daily and W4 Weekly in SPY.
• 1930 Bear Market Rally repeat and "W" pattern SPY?
• Weak calendar months of September and October.
• Overbought short-term SPY.

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.