Music suggestion: Everyone should check out Freddie Hubbard "Goin' Up." It's a fantastic jazz album.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in [[IBM]] over the next 72 hours.

Additional disclosure: The position is neutral.

I believe in a few things. I believe that technical analysis works and Ichimoku is my preferred system (although there are many great methods). I also believe in patterns that occur over and over again, everywhere in the world, including markets. And finally, I believe that the market is so forward looking that it almost fears the recent strong economic data, because it indicates a greater chance of Fed monetary exit plans in the Fall.

As mentioned above, the strong data has mixed implications in trader/money manager psychology. That can be a catalyst, combined with temporary buyer exhaustion, to take some of the steam out of the market

Regarding Ichimoku, you can use Ichimoku a few different ways. It serves to show support and resistance levels. It helps you identify the trend. And it can provide you with good entry/exit setups. I think that it is important to use all of these in your analysis. So you want to find out, what is the big picture trend? What are my current big support levels? And would cause me to change that opinion?

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As you can see above, the fact that price is above the Tenkan (blue line) and Kijun (red line), above the cloud (shaded area), and the Chikou (white line), all show that the trend is up. The same goes for even larger time frames (weekly) as well. I like to use the four hr chart too, because it fits my holding period best. It is also indicating the trend is up. However, the four hr looks to be turning.

Regardless, if we close below 1447.50, here is what I expect to happen. We will test 1520, and may initially bounce off it, but due to the extreme size of the recent move, the lack of hedge fund holdings in cash, the weekly RSI of 70, and the finally "high" retail stock enthusiasm, I believe the pullback will go lower than 1520.

I believe we will follow the same pattern from last March, when we saw the same pattern. Below is a shot of what happened the same period last year. See the similarities?

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So what happened last year? Well, it's easier for me to explain how the analogy fits. We will bounce down to 1520, pause and then go to 1480ish. Then we will get a bounce back up to 1520, then 1480/90, then back up to towards the highs, before proceeding down to a bottom near 1440/50.

That's the analogy, roughly speaking, that happened last year and may happen again. Below is the chart showing how the rest of March and April played out last year...

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The Play

I intend to buy an Apr 152/147/142 put butterfly for about .45 and look for a move to 1470-1500.

Follow-up @ 10:36am 3/14/13: Still haven't bought yet. Waiting for a close on hourly time frame below Kijun, which currently sits at 1554.

Disclosure: I am short [[SPY]].

Additional disclosure: I added SPY 154 puts this afternoon.

CME Group (CME) was downgraded by Zacks to an "Underperform" on February 27th. Zacks cited Y/Y revenue declines and decreases in analyst earnings expectations for 2013 and 2014 as reasons for the rating. Zacks noted lower trading volume and lower transaction fees as the cause for the analysts' reduced projections.

News also came out last week about the CME Group approaching the Deutsche Boerse about the possibility of a merger. However, Deutsche Boerse said that it was not in deal talks. A merger does make some sense as they have some overlapping products.

CME traded up $1.61 on the week to $59.92.

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NYSE Euronext

NYSE Euronext (NYX) stated that it will announce Q1 earnings on Tuesday April 30, 2013. The news release will come out at 2:30am ET and a conference call will occur at 8:00am ET.

NYSE Euronext announced that it will review whether mandatory testing and backup facilities should be implemented to withstand natural disasters. This was prompted by issues surrounding Hurricane Sandy last Fall. It is not clear how much implementation of these back-up features would cost.

NYSE Euronext closed the week down $.32 to $37.16.

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CBOE Holdings

CBOE Holdings (CBOE) announced that the cost to settle a probe with the SEC may amount to $10M. The probe concerned whether the CBOE was properly regulating itself. The company said that in addition to a monetary fine, it may also have to change compliance procedures.

Also last week, CBOE reported that February trading volume was up 3% over January trading volume, but was down 15% compared to February 2012.

CBOE traded down $.12 on the week to $35.42.

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Nasdaq OMX & Intercontinental Exchange

Nothing newsworthy happened to Nasdaq OMX (NDAQ) or Intercontinental Exchange (ICE) last week. Nasdaq OMX traded up $.22 on the week to $31.58. Intercontinental Exchange traded down $1.98 on the week to $154.

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Industry News

The task force set up by the International Organization of Securities Commissions to investigate how to improve LIBOR oversight stated that it will publish its findings and plans by this Summer.

The CFTC Chairman said that the Overnight Index Swap (OIS) Rate could be an alternative to LIBOR, which he obviously is not a proponent of. He stated that LIBOR is to easily "fixed," whereas OIS is based on transactions in the marketplace. He also listed other options including "benchmark rates based on actual short-term collateralized financings, and benchmarks based on government borrowing rates."

LIBOR remains a reference rate for 70% of the U.S. futures market.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Whomever is chosen by the College of Cardinals next month to succeed Pope Benedict will essentially have control over one of the largest, wealthiest, and most powerful organizations on earth.

Revenue

The Vatican has estimated revenues of $170 billion dollars annually [cite]; over 1 million employees; and billions of dollars in investments and bank accounts.

To put that revenue number in perspective, Apple (AAPL) has yearly revenues of about $165 billion dollars and General Motors (GM) has revenues of about $152 billion dollars.

Assets

What kind of investments and other assets does the Catholic Church have? The Guardian recently detailed the Vatican's commercial property empire, which they say was initially funded with a $50 million dollar gift from Mussolini, in return for the Vatican recognizing his Fascist party prior to World War 2. The Guardian estimated the current worth to be over $570 million dollars. Specifically, they said:

Since then the international value of Mussolini's nest-egg has mounted until it now exceeds £500m. In 2006, at the height of the recent property bubble, the Vatican spent £15m of those funds to buy 30 St James's Square. Other UK properties are at 168 New Bond Street and in the city of Coventry. It also owns blocks of flats in Paris and Switzerland.

Valuing the money in the smaller branches of the Catholic church -- archdioceses -- would also add to the overall wealth of the Vatican. Using information from a bond prospectus a couple of years ago, it's estimated that the Boston archdiocese has a net worth of approximately five hundred million dollars (subtracting liabilities from assets). A back-of-the-envelope estimate for American church funds would take the 32 archdioceses, multiplied by an average value lower than Boston's, because of lower property values across the country. We'll say $250 million to be on the safe side. That amounts to $8 billion dollars. The Roman Catholic Church has over 600 archdiocese around the world. While they likely have less assets than American archdioceses, that can give you an estimate of a large amount of wealth in areas outside the Vatican.

So, in addition to the Vatican commercial real estate worth over $570 million dollars; tens of billions of dollars in Archdiocesan assets in countries around the world; and revenues of over $170 billion per year, the Vatican bank -- the Institute for the Works of Religion -- has over $6 billion euros in deposits according to its director Paolo Cipriani. You are looking at an organization that has tremendous wealth.

Finally, an article in Time magazine from 1965(!) may help put total Vatican wealth into perspective. It stated:

Bankers' best guesses about the Vatican's [total] wealth put it at $10 billion to $15 billion. Of this wealth, Italian stockholdings alone run $1.6 billion.

If you take $12.5 billion dollars (half the estimate) and figure a rate of return of only 7% over 47 years, it amounts to about $300.5 billion dollars.

The secrecy of the Vatican makes it very difficult to figure out the true investments and wealth. Additionally, religious institutions are not forced to provide details of their investments or income in the U.S. Suffice it to say, the Catholic Church has a lot of wealth in investments, real estate, gold, church artifacts, and money. So what investments could it make going forward in the U.S. stock market (after all, I should tie it into stock picks right)?

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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The Dollar

The dollar (DXY) broke above its recent trend line from the wedge it was in, and upon coming down to test is, it really bounced hard. That probably signals a couple-day correction at least.

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The weekly chart below shows a much larger time line. I don't post this to show that we could go back towards 85. I only post it to show how strong the resistance (support) is at 82. It is a frequent stopping point for the stock, from whichever direction it approaches. If we bust through that, watch out. The correction could be large. Until then, I expect the dollar to bounce off of 82 and any correction to be reasonable.

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Bonds

The bond ETF (TLT) is another proxy for the market. Notice in the chart below the downward channel it has been in for almost 3 months. If it breaks out of the channel to the upside, it would confirm that a correction is taking place. I would expect it to break out even on a smaller correction.

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VIX

The VIX has been languishing for weeks. It can move in a huge hurry, so I am just watching for any break above the 55 moving average on this weekly chart.

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Junk Bonds

Junk bonds swooned two weeks ago, which could be a sign, but it is currently just below its 21 day ema and 55 day ema. In the second chart I put in a trend line. Will watch for it to break that, which could signal a larger correction.

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This could be the start of a sustained move back toward 1460. But I would need to see one of these beside the dollar for it to convince me we can go to 1450-60. If the dollar breaks above 82, it could be an even larger pullback toward 1420.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Mr. Zweig wrote the first investing book that I ever read. I was about 12 years old and I either checked it out from the library or got it off of my dad's book shelf. I'm sure I did not understand most of what was written in the book, but if it only taught me that this was a man of importance in the investing/trading world, that was good enough. I believe that my decision to read "Reminiscences of a Stock Operator" came about because of his admiration for Jesse Livermore.

Zweig received degrees from Wharton, Michigan State, and the University of Miami in the 1960's. He started out "on Wallstreet" writing a newsletter in the 1970's. He then penned articles for Barron's Magazine, and finally became an advisor to Wallstreet. At one time Zweig owned the most expensive condo in America.

In addition to excellent stock picks using fundamental analysis, Zweig combined technical analysis into his analysis. He came up with the Put-Call Ratio as a tool for measuring investor sentiment. He also helped promote other technical analysis methods to evaluate stocks and the market overall.

In some sense, Zweig's book started me on a journey since age 12 that has shown no signs of slowing down. I am grateful for that.

The Zweig Fund's (investment advisor: Zweig Advisors LLC) Top Holdings include Apple (AAPL), (IBM), Qualcomm (QCOM), and Gilead Sciences (GILD).

Best, N.P.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.