Futures Down as Market Looks to Build on Yesterday’s Bounce

Yesterday the market gapped up and had some small follow throughout the day, but active traders hate when the high of the day is put in at 3:00, and not on the close. This type of action makes it for tough trading, meaning if you came in flat and then started to accumulate a decent looking stock for the day and cost averaged in all day, by the end of the day you were under the price. That’s why gap ups are frustrating. Today, we are seeing the futures point to a lower open, and traders are at a loss for how to handle it. With quad witching on Friday, it seems like a time to be hands off.

The big question out there now is: was that the oversold bounce, or perhaps day 1 of a new attempted uptrend? We might not get a true answer until next week once quad witching is behind us. A starting point for the bulls will be to protect yesterday’s gap, which starts at $128.77 in the SPY. If bears fill the gap today or tomorrow (from yesterday’s gap up), that gives us clues that bulls don’t have much power and can’t keep those shorts trapped and this will lead into a choppy oversold bounce that was probably quad witching-induced.

The Euro is down and the Dollar is up, so this is putting some pressure on the futures early. Traders may look to buy some strong stocks from yesterday for a negative to positive trades, and do the same with SPY. If we hold up the next obstacle to the upside will be a mini trend line at $129.90-130.. The next above that which will be big area of resistance is $130.80-131.40. This will be the line in the sand that Bears will need to defend vigorously if the market has the power to get there in one of the next few session. Bottoms don’t usually happen in June, and this is not a time to put on a dozen different positions for a likely move, just selective trading.

Tech
Apple Inc. (AAPL) held the lower end of the range and gave a nice entry on Monday. Yesterday it hit lower resistance in the $332-334 area, and the next area will be $336-339. This is where most moving averages have rolled down to. If the stock is any good it should hold $328-330.

Amazon.com, Inc. (AMZN) held above the 100 day, which is showing a lot of relative strength vs. other tech. A move above $191 with some volume will squeeze some shorts and give some clues that the tape is a little stronger.

Netflix, Inc. (NFLX) held the 20 day MA, which is considered very strong action. If it can break the mini descending channel above $263-265, it could frustrate some shorts and give a cash flow long. Stock did hold the prior break out of $255, a positive sign.

Google, Inc. (GOOG) rallied back to test the broke support of $513-515 and failed. It’s still considered weak and just a trade.

VMWare, Inc. (VMW) is still holding up well and acts decent on strong days. It’s one of the few stocks above most moving averages. It will probably make a nice momentum move at some point, but needs time to set up.

Juniper Networks, Inc. (JNPR) we talked about it being low enough for a trade yesterday. Nice reddog reversal, and it has some room to bounce back to $32ish then perhaps $34.

After the recent carnage, we always have to check in with our Chinese internet buddies.

Baidu.com, Inc. (BIDU) is by far the most solid and strongest technically of the Chinese internet companies. It had a nice move yesterday, and actually gave you a entry if you didn’t come in long early in the trading session. If it can get through $125.50 and hold, big resistance comes into play at $129.

SINA Corpoartion (SINA) was not as powerful as BIDU, but a decent early move before pulling off hard. The stock is tricky. If it gets above $93.40, I think it can see $98-102 which will be big resistance.

While traders are watching SINA and BIDU for bounces, counterparts Youku.com Inc (YOKU) and Ecommerce China DangDang Inc (DANG) could have more downside after doubling and tripling their floats, respectively, last week. They have been the weakest of the bunch, and it seems IPO investors want out.

Retail
Retail HOLDRs ETF (RTH) bounced off the 200 day, and let’s measure the bounce. Maybe it can see $107.

Lululemon Athletica, inc. (LULU) has a 2 for 1 split coming. Holding up pretty well- next resistance $91-93 and then macro downtrend at $95.

J.C. Penney Company, Inc. (JCP) had a huge move on news of the new CEO from AAPL’s retail division. It triggered a big squeeze back to big resistance. I would be careful here and give it some time.

Banks showed some relative strength and they were decent shorts on yesterday’s open. Perhaps they area buyable today.

Goldman Sachs Group, Inc. (GS) $134-135 must hold in order to get a move through $139-140 for a move to perhaps $144.

JP Morgan Chase & Co. (JPM) reached our resistance target- now it needs to hold above $41 for hopes of more than just a bounce here.

CurrencyShares Euro Trust ETF (FXE) could have put in a third lower high. $142.65 is big support, if it trades and holds below that level perhaps, finally the euro gets some more of the downside pressure it deserves.

By John Darsie

Disclosure: Scott Redler is long AAPL, BIDU, SPY

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