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MARKET ANALYSIS

Since our last report, continued and heightened financial anxieties and a worsening global perspective keep the third quarter kick-off a less-than-sizzling affair. For the three-day period, Naz’100 (QQQQ) and “SPYder” (SPY) are down 1.20% to 1.33% with no financial fireworks in front of the holiday.

Somewhat stretched technical bells and whistles have grown more persistent in their noise-making over the past couple sessions. Continued and worsening financial wobbles both stateside and abroad (DB, UBS and GM) have taken their toll on sentiment and prices. Warnings (UNH, SBUX and NVDA),  downgrades (MER and AET),and once-hallowed grounds (POT, PCX, MDR and FWLT) of technical wherewithal have also aided in the downsizing of prior bull markets.

And of course, there’s always that other crude reality related to America’s Oil Crisis per CNBC. Now, traders need to worry about more than just record highs for the commodity and its impact on consumers and businesses. With investors fretting over the possibility of a global slowdown (again), negative sentiment is fully capable of taking the simple act of profit-taking and bandying it about as a harbinger of weaker demand in a very mad money market.  

Market Snapshot

Figure 1: S&P500 (SPY) Weekly

“Are we there yet?” Entering Monday’s session there is reason to believe that we could be very close. For its part, the S&P 500 has undercut its prior 2008 double bottom but reversed in an undercut triple pattern. At the same time, the VIX is at its most fearful levels since March. Unfortunately, the “Stretch” indicator continues to miss by the narrowest of margins. Entering Tuesday, 27% is the level where short-term signals would officially receive confirmation of the S&P500’s pattern low and an “Attempted Rally Day” being an extreme enough event worthy of reversal strategists willing to gnaw on a few bears and wounded bulls.  

The following factors and anecdotal evidence might be considered relevant in determining a suitable, limited-risk strategy in the coming days and weeks ahead.

MARKET LAB

Bullish Technicals

• Dumb $ at sentimentrader.com worst since March.
• AAII, Investors Intelligence, Small Specs, Insider Scores and other surveys overwhelmingly favor near-term upside.Retest DIA, Approaching full-fledged test in SPY. Rally Attempt SPX, NAZ’ and Dow on 7/3.

Bearish Technicals

• Bearish H & S confirmed from weekly wedge S&P 500 and Dow.
• Market Under Correction.
•  “VIX Stretch” (Px > 15% of 10-DMA) still slightly removed from confirmation.
• VXO still below 30% is historically ominous per Quantifiable Edges.

GROWTH STOCK ANALYSIS

It’s more of the same thoughts on the market as it relates to growth stocks. Names cherished technically a short time ago continue to make us wonder, “What the heck were we thinking?” As such and with even more stocks looking quite panicked, it’s a situation of status quo for the component stocks of the radar below. And at the same time, the message of softening and easing into any long delta ideas remains a wholly prudent one in today’s mad money market.

RADAR SCREEN

The following optionable stocks look to have a combination of technicals and fundamentals that might warrant further investigation based on a trader’s own methodology and risk acceptance. The list is not a recommendation and is intended for educational purposes only.

The Bulls

Table 1: Bull Watch list

Non-Directional

Table 2: Basing Watch list

The Bears

Table 3: Bear Watch list


Chris Tyler
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
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. 

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