Growth Stock Swing Option: Oct 29, 2009

• By Chris Tyler
• On 5:36 pm EDT, Thursday October 29, 2009

MARKET ANALYSIS

Bulls nibble on the market's "red chutes" of late courtesy of oversold conditions and easier to cheer data. For the three day period the SP-500 (SPY) is down a mild -0.24% in volatile conditions which have been anything but complacent.

Key highlights for buying a little "MOOyah!" during the three day "Monbacky!":

• BP's (BP) jolly good assist for oil and gas heavyweights ExxonMobil (XOM) and Chevron (CVX) Tuesday.
• IBM (IBM) buyback and dividend raise news during Tuesday's session.
• Economic feel good data points from durable goods and Q3 GDP's unofficial recession-ending 3.50% growth.
• VIX Stretch signal of 16% Wednesday and oversold break of 50-SMA SPY.
• Dollar relief Thursday after four day run.

Key highlights for schnitzeling a little during the "BOOyah!" off weekly highs:

• Further unwind of US Dollar (UUP) carry trade and associated rotation out of riskier and tied at the hip assets on Tuesday and Wednesday.
• "Do you Baidu (BIDU)?" China-based Naz' 100 sets bearish tone for tech Wednesday with reduced outlook.
• "Jobless recovery" latest confirmation from larger-than-expected claims data.
• Weaker than forecast new homes sales.
• Larger technical outlook.

Market Snapshot

Figure 1: S&P500 (SPY) Weekly Cycle Completion

A stretch of nearly 16% in the VIX above its 10-day moving average and a feared 4.50% multi-day "whoosh!" that closed the SP-500 below its September "feel good" finale and the sometimes coveted 50-day moving average were enough to inspire bulls into action on Thursday. Oh yeah and the Q3 GDP, according to the popular headlines of the day.

On tap for Friday and the eve of Halloween, will it be a scary ending for the month of October? With back-to-back wide range reversal candles in place and in appreciating the powers that be, whom would likely enjoy seeing a positive return investment for the major benchmarks-I'd say it's unlikely.

Getting past the short-term maneuvers of window dressing, after a 2.15% one day jump, bearish shorts against resistance levels are setting up or close to being ready in a declared, "Market Under Correction" per the folks at IBD. With the longstanding list of bulleted points below favoring the bear, a bounce isn't being considered as anything more than a fleeting opportunity within a larger situation used to secure the bearish delta.

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

• Breakout of daily / weekly downtrend from Sept 2008 highs DIA.
• Weekly Inverse H & S being breakout from October lows. "MM" of 113 - 120.
• Neutral short-term conditions despite two percent plus SPY gainer Thursday.

Bearish Technicals

• 1930 Bear Market Rally repeat and "W" pattern SPY?
• Third time the charm? Potential W5 Daily and W4 Weekly in SPY.
• At 65%, market's run has "Come a long ways, baby." Green Shoots priced in.
• Mostly long-term overbought market conditions.
• Confirmed "Extended" 13-week topping as part of 13-5-15 cycle.
• SPY resistance 107.50 - 108.

RADAR WATCH

It makes little sense to post below fresh breakouts (the few that exist), support or even lowlier oversold candidates for the Bulls Radar given my predisposition for seeing an intermediate high in the market. That said, if traders are looking to enter there's certainly plenty of stocks setting up in the latter two categories. Citrix (CTXS), Atheros (ATHR), Calgon Carbon (CCC) are a couple names which fall into those cateogories, while Mbia (MBI) fits in the extreme "Monbacky!" category.

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
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.