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

February shined with its best gains in twelve years, according to those end-of-month bean counters at CNBC, but 2010's volatile bull continues to face technical challenges and plenty of economic hurdles entering March. For the five-day period, the SP-500 (SPY) is off 0.36% on heavier-than-normal "snow job" totals to finish a sometimes chilly month of February.

THE WEEKLY NUTSHELL

• Bulls revel in Merger Monday headlines and overseas strength out-the-gate but fail to lift market prices as overbought conditions and technical resistance resonate by the closing bell. Schlumberger (SLB) moves quickly and surprises Street with $11.3B ante for Smith (SII. Millipore (MIL) soars on $6.0B bid from Thermo Fisher (TMO). Surprise 1.40% increase next year to baseline Medicare payment rates puts helpful bid into HMOs (AET, UNH, WLP and CI). Lowes (LOW) kicks off retail-heavy earnings processional with mixed report and muted investor reaction.
• "Terribull Tuesday" according to the bulls. Technical platform ripe for profit-taking batters bulls with "Worst Since..." headlines as majors finish a not-too-rough and tumble -1.00% decline. Trio of disappointing economic reports from Europe and weak stateside sentiment reading act as triggers for bulls overdue to "schnitzel a little" following near 7.00% and two week climb. Bulls take some refuge in Home Depot (HD) beat, guidance raise and dividend increase.
• Bulls bounce back on bargain-hunting Wednesday. Weak participation gainer inspired by status quo Fed testimony of moderate recovery, pressed jobs situation, subdued inflation and "exceptionally low" fed fund rates for "extended period." Dismissed or perhaps further confirmation of soothing rate talk, January new home sales plummet by alarming 11.20%.
• Turnaround Thursday as "Opening Hell" rescued by bargain-hunters willing to forgive or forget with closing token but likely inconvenient -0.10% drop in SP-500. Early humper courtesy of credit downgrade buzz for Greece in front of its planned debt offering. Surprise weekly claims increase of 496,000 aids pre-market pressure as does unexpected drop of -0.6% in durable goods ex-transportation and -1.60% housing price slip for December. Intraday and lacking fresh catalysts bulls nonetheless stage a bargain-hunting style rally in tandem with profit-taking in Greenback. Mixed and volatile reactions to earnings but retailers (LTD, TRLG, CRI) on a whole provide some relative strength on session with Kohl's (KSS) mixed report leading the way.
• "Flat and failing grade for bulls Friday." Despite trio of pleasant overseas economic data points (Brit GDP, Japan factory and retail), decent stateside GDP growth of 5.9% and PMI beat, bulls fail to bargain hunt at higher levels and finish mostly flat on session. Ugly and complicated loss for AIG (AIG) and fairly large surprise 7.2% drop in existing home sales act as likely drags in heavy volume doji churner below key resistance in SP-500.

ON TAP THIS WEEK

The retail sector will continue to dominate the earnings landscape this week. However, after two weeks of digesting reports tied to the consumer and mostly second tier shops reporting, tone-setting for the broader market will be in likely need of other catalysts. One crop of releases that might be of greater interest to bulls and bears is Wednesday morning's trio of reports from cost conscious outfits Costco (COST), BJ's (BJ) and Big Lots (BIG).

Did someone say other catalysts? Economic watchdogs will have their hands full throughout the week, beginning with consumer income and spending and ISM data on Monday. Other reports of likely interest will be Wednesday's Beige Book and two reports on private sector employment data. Bar none, though, Friday's monthly jobs report for February, will undoubtedly receive the most lip service as is usual.

One twist throughout the week according to analysts could be the unreliable nature of the economic data on tap. With much of the country, in particular the East Coast, subjected to a series of winter storms, the worst on record, numbers could be more of a "snow job" than business as usual.

Also on the radar will be a slug of stateside Fed Heads talking this week and interest rate / "exit strategy" meetings from the likes of Her Majesty and the EU on Thursday. Finally, traders will be watching Greece for clues as it looks to auction off $7.0B in bonds to raise capital. Whether Germany or the EU steps up and guarantees the bonds could sway investor sentiment which has been concerned of a possible "snowball" effect should Greece be forced to default on its obligations.

Weekly Calendar of Key Reports

Monday
Economic Inc & Spend (0.4%, 0.4%), Core PCE (0.1%), Construction (-0.5%), ISM (57.8)
Earnings DISH (DISH), Intrepid (IPI), Overseas Ship (OSG), Perfect World (PWRD), Public Storage (PSA), Sotheby's (BID), Dress Barn (DBRN), MBIA (MBI), McDermott (MDR), Mindray (MR), Nutrisystem (NTRI)

Tuesday
Economic Auto & Truck
Earnings AutoZone (AZO), Cooper Tire (CTB), Del Monte (FDP), Domino's (DPZ), Staples (SPLS), Tech Data (TECD), Copart (CPRT), Hovnanian (HOV), K. Cole (KCP), URS (URS), Verifone (PAY)

Wednesday
Economic Weekly Crude, Challenger Survey, ADP (-10K), ISM Services (51.0), Fed's Beige Book
Earnings Big Lots (BIG), BJ's (BJ), Costco (COST), Canadian Solar (CSIQ), Joy Global (JOYG), Maidenform (MFB), Coldwater Creek (CWTR), Foot Locker (FL), Home Inns (HMIN), Nat Gas Srvc (NGS), PETsMART (PETM), Sigma Design (SIGM), Sia (SINA), Volcano (VOLC), Del Monte (DLM), Fuel Systems (FSYS), Medifast (MED), Teekay (TK), Urban Outfits (URBN), Wendy's (WEN)

Thursday

Economic Weekly Claims (475K, 4.60M), Productivity (6.2%), Factory O's (1.2%), Pending Homes (1.7%)
Earnings ArcSight (ARST), Cooper (COO), Marvell (MRVL), Mentor (MENT), Silver Wheaton (SLW), S1 Corp (SONE)

Friday
Economic Feb Monthly Jobs (9.8%, -20K), Consumer Credit (-$3.8B)
Earnings Aircastle (AYR), Solarfun Power (SOLF)

TECHNICAL PICTURE

Figure 1: S&P500 (SPY) Daily Resistance

By week's end the likes of CNBC.com seemed preoccupied with how well the market performed given overall poor reports for the period. This strategist questions that "strength." My concern is what constitutes strength versus bargain-hunting efforts and ultimately accepting market conditions much more in tune with the latter.

Last Thursday's reversal was a classic bout of bargain-hunting as a near 1.75% opening gap was the largest and most extreme incident in months. However, bulls only managed to prod and poke market prices back near unchanged that day. Not a bad performance, but a worse omen did present itself on Friday. Bulls showed an unwillingness to buy at higher prices and with renewed vigor versus bargain-hunting per se, in establishing Friday's higher volume doji (indecision) candle beneath the 50-SMA.

The fact prices closed indecisively like they did on Friday leaves this market strategist with the impression bears maintain the stronger position. It's widely believed the question mark left by the doji can resolve itself in one of two (or three) directions. But given the bulls' inability to produce upside follow-through or an actual FTD on day 15 of a now historically extended rally, this corner sees the benefit of the doubt going to the bear camp until proven differently.

MARKET LAB

Bullish Technicals

• November thru April strongest six months for equities historically.
• Corrective activity of roughly 9.10% for SP-500 with 38% test July lows.
• Third Rally Attempt on 2.5.10.
• Heavier volume bargain-hunting off 38% level in SPY Thursday suggests enthusiasm for "Monbacky!" not "Barackouts!"

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl
• High volume break below key 1100 and 50-SMA supports in SP-500.
• IBD's "Market Under Correction."
• SPY highs around key zone 50SMA / 62% resistance.
• No "overbought" readings in VIX at profit-taking lows in Thursday's session.
• Weak institutional support during rally attempt off lows.
• Failure of FTD to show up late through Day 15 following "bargain-hunting" platform.
  
  

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.