Note: This week's Market Outlook was covered by Optionetics.com's Chris Tyler.

The week ahead promises a bevy of influential corporate confessionals, but politically-charged catalysts should prove the stronger motivator for investors. For the four-day period, the SP-500(SPY) is off 3.90% and the bull looking leaner from its recent top heavy ways.

THE WEEKLY NUTSHELL

• Bulls don their optimistic threads Tuesday in front of key Senate race, IBM (IBM) and a slug of banking (BAC, WFC, STT, MS) results and despite stronger Greenback. SP-500 sets fresh closing high. Nearly 90% of components up on session gainer of 1.25%, closing narrowly above 1150 level, but on lighter (post expiration) volume. Big Pharma (PPH, MRK) and healthcare insurers (UNH, CI) lead the bid as possible Republican win gains traction for MA seat. Cadbury (CBY) takes sweetened $19.44B (chocolate) carrot from Kraft (KFT).
• A humper of a Wednesday for bulls. Despite being presciently correct with mostly strong and well-received banking reports (STT, MTB, NTRS), IBM's better-than-expected results and upside guidance and filibuster-breaking win in the Senate, word Chinese policymakers ordering banks to curb lending in an effort to stem overheating economy ignites sell-off. Dollar (UUP) thrusts higher on tighter monetary concerns from China, while green shoots laden and commodity-based (GLD, GDX, SLX) carry trade goes bust.
• Follow-Thru Thursday as bulls take profits into 50-SMA. Further monetary action concerns from China as country's GDP shows signs of overheating. Continued tied-at-the hip carry trade pressure as bulls unwind overly optimistic positioning. Weaker-than-expected and rising weekly claims data confirms more of the same ol' "jobless recovery." Obama administration proposed restrictions on "ownership, sponsorship or investment" in hedge funds for proprietary profits sends financials lower despite better-than-expected earnings results (GS, FITB).
• Bulls say "TGIF" as "Closing Hell" technical route plagues market in worst single session decline in three months. Downside follow-through below the 50-SMA and 1100 in SP-500. Crucifixion of banks continues on Obama proposal. Slight profit-taking in Greenback aids commodity complex in establishing fractionally mixed, relative strength position for bounce. More mostly better-than-expected but mostly dismissed corporate results (GE, MCD and GOOG). VIX surges for second session in largest two day rise in more than one year.

ON TAP THIS WEEK

So it turns out, not-too-surprisingly, the Mad Money's declaration of the strongest catalyst for bulls last week, a win by Republican Brown in the Senate, was way off-the-mark. That is, unless you as a bull presciently sold Tuesday's optimistic bid in front of the actual confirmation. "Booyah Jimmy."

Entering Monday, the market is well oversold in the short-term and much more volatile than a week ago. Those factors should be considered extra important for traders making portfolio decisions in the days ahead. That being said, the docket does offer a bevy of actionable catalysts on the economic and corporate fronts.

About one-quarter of the SP-500 reports this week with confessionals from the likes of Apple (AAPL) and Texas Instruments (TXN) kicking the parade off Monday evening. However, trader's primary driver this week will be "politics as unusual."

Spearheading the heavy mix will be Wednesday's State of the Union Address and the FOMC Decision on rate policy. Traders will also be on guard for further insight into the Obama Administration's plans on hedge fund regulation with regards to the banking industry. Additionally, Fed Chairman Bernanke will be awaiting a vote in the week's second half regarding his re-appointment. Politicos see his confirmation as a tight one as more than a few prominent Democrats have already stated they won't endorse Bernanke for a second term. According to PIMCO bond strategist Tony Crescenzi on CNBC, that outcome would be "a bad signal for markets", possibly reflecting a lack of confidence with the government's involvement in the financial markets.

Weekly Calendar of Key Reports

Monday:
Economic Existing Homes (5.90M)
Earnings Eaton (ETN), Halliburton (HAL), Ericsson (ERIC), Quest D (DGX), Sealed Air (SEE), Apple (AAPL), Amgen (AMGN), Atheros (ATHR), Jacobs (JEC), Texas Instr (TXN), VMware (VMW), Zions (ZION)

Tuesday:
Economic Case Shiller (-5.00%), FHFA Home Price Index (0.1%), Consumer Confidence (53.5)
Earnings Corning (GLW), DuPont (DD), Delta (DAL), Nucor (NUE), Peabody (BTU), EMC (EMC), Travelers (TRV), US Steel (X), Verizon (VZ), Gilead (GILD), McKesson (MCK), QLogic (QLGC), Stryker (SYK), WMS (WMS), Yahoo (YHOO)

Wednesday:
Economic New Homes (370K), Weekly Inventories, FOMC Decision (0.25%)
Earnings Alleghany Tech (ATI), BlackRock (BLK), Boeing (BA), Caterpillar (CAT), Conoco (COP), Illinois Tool (ITW), SAP (SAP), Smith (SII), Southern (SO), UAL (UAUA), Citrix (CTXS), Flextronics (FLEX), Green Mtn (GMCR), Netflix (NFLX), Ryland (RYL), Symantec (SYMC), Qualcomm (QCOM)

Thursday:
Economic Weekly Claims (450K, 4.60M), Durable Orders (2.0%)
Earnings 3M (MMM), AT&T (T), Altria (MO), Celgene (CELG), Danaher (DHR), Checkpoint (CHKP), Colgate (CL), Lilly (LLY), Kodak (EK), Motorola (MOT), Oshkosh (OSK), Potash (POT), P&G (PG), Tyco (TYC), Amazon (AMZN), Chubb (CB), Cymer (CYMI), Juniper (JNPR), KLA-T (KLAC), Microsoft (MSFT), SanDisk (SNDK), Vistaprint (VPRT)

Friday:
Economic GDP Adv & Deflator (4.6%, 1.3%), ECI (0.4%), Chicago PMI (57.4), Michigan (73.0)
Earnings Arch (ACI), Chevron (CVX), Fortune B (FO), Honeywell (HON), Mattel (MAT), Rubbermaid (NWL)

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Daily Chart

Last week's anticipated "room for a bit more downside" was fulfilled during last week's three day, heart pounding corrective sell-off. The market pressure was the largest such incident since June. Our prognosis was spot on in estimating a "bare bones" test in the SP-500 down to its 50-SMA and 50% Fib retracement area.

Friday's extreme second half action on the other hand, did go beyond what was anticipated by this strategist. I personally thought 1100 would hold and a stretch to 24% in the VIX during Friday's first half-would be sufficient to play a swing bounce from. "Doink."

Entering Monday, aside from the market being vastly oversold short-term, I have little if anything positive to say on behalf of the bull camp. A well-overdue intermediate top does look to be in place and getting too aggressive or fixated on what constitutes "oversold", particularly after ten months and a 70% run in the SP-500, can be a recipe for disaster as it relates to buying the pullback, dip or "Monbacky!"

The question now is how to short with more favorable odds and when does playing for a bounce make sense? In this trader's opinion 111 - 113 is resistance in the SPY which won't likely be overcome anytime soon. The closer we are to that range or inside of it, the stronger the potential short. Oversold readings will have dissipated and a VIX which as of Friday evening strongly suggests not chasing too aggressively bearish deltas at this juncture won't be nearly as persuasive.

MARKET LAB

Bullish Technical

• November thru April strongest six months for equities historically.
• "Extreme" VIX Stretch in excess of 35% on Friday.
• Oversold conditions and 4.50% correction for SP-500.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl
• Mostly long-term overbought market conditions/weak internals.
• Q3 "Recession is over" data confirmation.
• High volume break below key 1100 and 50-SMA supports in SP-500.
• Waning momentum to fresh highs after 10-month long historic rally.

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.