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

Friday's "Best Picture" honors go to the bulls but this week's coming attraction of a double top could spell trouble. For the five-day period, the SP-500 (SPY) is up 3.17% on a crowd pleasing performance potentially worthy of profit-taking before another sequel might be released.

THE WEEKLY NUTSHELL

• It's the beginning of March Madness for bears as bulls revel in spate of Merger Monday headlines and break recent highs in market. Pru PLC's surprise mega $35.5B acquisition for AIG's (AIG) Asian unit. Germany's Merck KGaA left field $107 per share / $7.2B deal snatch of in-play Millipore (MIL). Hostile 40% plus / $3.5B bid for Osi Pharma (OSIP). Not fazing bulls is HBC's (HBC) "pounding" miss, sympathy weakness in financials (XLF) and mixed income / spending report showing unsustainable reaching into wallets by consumers.
• "Follow-Through Tuesday?" Higher volume fractional gravestone doji follows Monday's bullish but somewhat suspect intermediate-based FTD signal. Monday's suspicious bear Qualcomm (QCOM) leads tech and bulls higher with dividend raise to $0.19 and $3.0B buyback news. Fellow "prior" technical laggards in commodity (GLD, GDX and SLX) arena find relative strength bid. Aussie rate raise news helps bulls promote optimistic economic growth-in-progress theme. Aggie CF Industries (CF) also provides market and "carry trade" support with its latest $4.5B bid for fellow manure, umm fertilizer play Terra Industries.Non-humping but near-engulfing second straight gravestone doji and flat finish don't add up for bulls Wednesday. Greece announces budget deficit plan to muted fanfare as possible worries of still troubled Portugal and Spain weigh in. In-line jobs contraction of 20K from ADP. ISM Services beats and expands to 53.0, acting as chief support for bulls intraday. Blame game Wednesday falls on afternoon Beige Book showing economic improvement but stagnate jobs. Bulls (and bears) score triple doji fractional gainer on Thursday. Better-than-expected same-store sales (TGT, ANF) showcase for bulls. Wal-Mart (WMT) raises dividend. Productivity beat with 6.9% jump largely aided by the likes of in-line and still weak claims data. For the bears, unexpected 7.60% plunge in pending home sales, traders exercising caution in front of Friday's NFP report and token woes over bid in US Dollar, though not enough to spoil bulls party on eve of one year March Bottom "sell-e-bration." Friday's "Best Picture" goes to bulls better-than-expected production of "-36,000 Nonfarm Payrolls." Unemployment of 9.7% still at uncomfortable levels, but bulls cheer broader averages to best closing levels since rally high set Jan 19 on "improved outlook" thesis. As much, investor daring do / attitude sees green shoots inspired commodity complex (SLX, XLB, USO) and consumer financials (COF, V) hoisted into relative strength positioning.

ON TAP THIS WEEK

Earnings season is winding down in a big way this week with the pace of reports dropping off rather aggressively and nary a Dow or Naz' 100 component releasing results. As much, individual companies or sector themes worthy of moving the broader market have about the same likelihood of Inglorious Basterds does winning Best Picture at the Oscars tonight. That's not to say we don't have our favorites and that some moving performances aren't likely.

One such name whose star his risen of late due to the surge in 3-D productions and likely nod for Best Picture 2010 for a little film called Avatar is IMAX (IMAX). The cutting edge cinema experience provider for 21^st century audiences announces its results Thursday before the opening bell. Analysts expect the company to show profits of $0.08 per share versus last year's loss of -$0.11.

This past Thursday, boutique shop Brigantine Advisors told investors the prior session's (nasty) pullback presents a buying opportunity. In the other ballot box, we'd be remiss if we didn't note the reason behind last Wednesday's -9.75% "pullback" was a bearish report from "higher up on the food chain" broker Merriman. Analysts there see the "competitive thesis" against IMAX continuing to build.

The latest challenge for IMAX is AMC theatres which opened an "Enhanced Theater Experience" at Walt Disney World. They believe the company is a serious threat and an "accelerated rollout of 3D screens will give consumers another less expensive option to see 3D movies in a comparable setting, with non-IMAX screens anticipated to jump from 3,300 to more than double by year's end and to 11,000 during 2011."

On the economic junket this week, the lick and importance of stateside reports also sees a strong downward shift as far as market muscling is concerned. However, data out of China will be fairly strong throughout the period and possibly worthy of market tone-setting. On Monday the Manpower Survey is announced, followed by data on imports / exports, PPI and CPI, retail sales and industrial production during the week.

Here in the US, the spotlight will shine Thursday morning as both weekly claims and retail sales data will be announced. Evidence this past week showed that despite a still difficult jobs environment, albeit slightly better than expectations, consumers have been shopping a bit more aggressively than in months past at their favorite retailers according to a decent overall uptick in same-store sales results.

In passing and possibly making a fuss on trader's screens, Greece's PM makes his way to the White House early this week. Additional clarity of what the EU and member countries plan for Greece and maybe associated trader talk for Portugal and Spain's sovereign debt troubles will be on the menu but not necessarily served up. Separately and speaking of debt, during the week the Treasury will auction off a substantial $200B plus in various maturities, which might provide some additional clues as to investors risk appetites.

Weekly Calendar of Key Reports

Monday:
Economic NA
Earnings Duoyuan Water (DGW), Yingli Green (YGE), Casey's (CASY), H & R Block (HRB), TiVo (TIVO)
Tuesday:
Economic NA
Earnings Dick's (DKS), E-House China (EJ), Kroger (KR), A123 (AONE), Boston Beer (SAM), J. Crew (JCG), Verisk Analytics (VRSK)
Wednesday:
Economic Weekly Crude, Wholesale Inventories, Treasury Budget
Earnings American Eagle (AEO), Children's Place (PLCE), Harbin Electric (HRBN), ReneSola (SOL), AboveNet (ABVT), Clean Energy (CLNE), Men's Wearhouse (MW)
Thursday:
Economic Weekly Claims (460K, 4.49M), Retail Sales (0.2%, 0.0%), Trade Balance (-$41.0B)
Earnings China Sunergy (CSUN), Imax (IMAX), Jackson Hewitt (JTX), The Buckle (BKE), Aeropostale (ARO), Goldcorp (GG), Nat Semi (NSM), Pall Corp (PLL), Zumiez (ZUMZ)
Friday:
Economic Michigan (73.8), Business Inventories (0.2%)
Earnings AnnTaylor (ANN), Citi Trends (CTRN), Hibbett Sport (HIBB), Kirklands (KIRK)

TECHNICAL PICTURE


Figure 1: S&P500 (SPY) Daily Testing

Following a triple play of potentially bearish but ultimately indecisive dojis set just below 78% Fibonacci resistance, Friday's jobs report provided the fuel for an upside gap helped along by flat-footed bears. Entering Monday and with an existing, albeit technically very late follow-through day in place, bulls seem to have the upper hand as the market is now within one percent of a full-fledged retest of its historic rally highs.

Personally, while I don't agree with that type enthusiasm or "discounting" taking place, I certainly wouldn't dismiss traders embracing ever optimistically, a retest or fresh highs on the one year anniversary of the historic March low set back on March 6 or 9, 2009-depending on whom one asks.
A "surprise" Merger Monday headline could provide that type of optimistic incentive after more than a few weekend handshakes during 2010 having already been granted.

More pragmatically and as the correction of the past month should instill to traders is not to get too bulled up in this environment after a generous swing higher. There isn't likely to be a repeat of last year's approximate 60% gains and to date, the market is up by about 3% on the year. With the VIX less than three-quarters of a point from year-to-date lows and pushing just more than 10% below its 10-SMA, gaps or quick thrusts in the next session or two are likely to push the instrument into levels associated with complacency and market turning points.

Whether such (anticipated) price action would ultimately mark a double top on the daily in the likes of the SPY, I don't know with any lasting authority. I can say however the combination does typically work out as a less-than-terrific short term spot to be overly optimistic and could always turn a lot more awful without too much effort.

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.
• Late FTD on 3.1.10.
• Increased market leadership from growth issues.
• No VIX Stretch signal in place, currently near 10%.

Bearish Technicals

• 1930 Bear Market Rally repeat states EW Intl
• SPY triple doji near 78% resistance.
• Weak institutional support during rally attempt off lows.
• Mixed and late FTD on historically late Day 16 of rally attempt.
• "Retest Double Top" SPY in conjunction with VIX Stretch / YTD lows on radar.

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.