World markets remained quiet overnight as it seems everyone is waiting for today’s much anticipated Fed decision regarding QE tapering. The fact that most markets are holding recent gains can be considered positive, and perhaps is evidence that many expect the Fed to show restraint with the size of this first taper.
The upside in September came quick and the question now is: how will our markets handle 1709 today? Typically on Fed days you get a lot of erratic movement after the release. At least now we have a pivot to use for short-term direction today and perhaps thereafter.
Could we power through and close above 1709, compelling some individuals to put new money to work and squeezing shorts that have been rolling them up? If that happened, it could open the door for S&P 1740-1760 in the 4th quarter. Or do we get a May 22nd-type outside day that could lead to a another 5% decline?
At this point most taper expectations range from $5-15 billion, with most cuts skewed towards the treasury side rather than MBS. I think the taper will be more towards the upper end of that range around $10-12 billion, but I’m only a technical strategist, not one of these high paid economists with huge research teams behind them. More of my thoughts on the taper were included in CNBC’s World Wide blog last night.
The S&P is up about 19% for the year, rewarding macro participants with a plan. If you trade intermediate trends more actively we’ve had a very strong one since the November 2012 lows. That trend line held again in late August at the 100-day around 1630ish. So now we have to trade the 4th quarter and continue to find nice set-ups and manage price patterns and sectors.
In today’s Morning Call we will go over the social media-type stocks that IPOed in the las few years that have been a focus of ours for most of 2013.
Facebook (FB) gave a great trade set-up yesterday when it held Monday’s low of $42.43 and rallied right off the open to gain 6%. It closed above Monday’s high, creating a powerful engulfing bar. Look for potential continuation to the upside above $45.44.
LinkedIn (LNKD) looks like it found its footing again at $244.52 after a few days of rest. Use this level as the new pivot to trade against. A break and close above the 8-day at $248.12 could set it back in motion. Overall, the chart looks good as its been holding above the 21-day since June.
Yelp! (YELP) had a nice reversal yesterday as the stock was back in motion after a few days of rest. It briefly pierced through the 8-day at $62.56 but had a quick snap back to finish the day up 5%. The stock closed on highs and looks poised to make a new high above $66.24.
Zynga (ZNGA) had a nice break out at $3.13 to gain almost 6% for the day. ZNGA was a main focus on our Virtual Trading Floor yesterday. We’ll keep the stock on the radar for potential additional gains above yesterday’s high of $3.30.
3-D printing stocks continue to provide new set-ups and opportunities.
3-D Systems (DDD) broke out of its descending channel on good volume yesterday. The stock gained 6.89% for the day and closed on dead highs, signaling potential upside follow-through. The prior pivot high is $54.78, and a break above this level could lead to the next round of short squeeze. Current short interest on DDD is 29.41%.
Stratasys (SSYS) had a potent pull-back recently, but the damage was contained at the $92 area as the stock absorbed the secondary offering well. It had a nice rally right off the open to gain 3.61% yesterday and close right in front of the 50-day MA. A break and close above this key moving average at $97.15 could squeeze some shorts out. Current short interest is 10%.
ExOne (XONE) is the most recent new issue in the sector, and hasn’t been able to find a friend lately. The recent potent sell-off has robbed it of some of its technical strength, especially after it broke below a key area at $66.50. Mike Lee and Steve Levay in the T3 Live “Trade the Open” room are stalking this one for a potential 80/20 reversal.
Some other notables.
Apple (AAPL) held Monday’s low of 447.22 and had a nice bounce to close back above its 100-day. The stock has some resistance from the 200-day at $460.82. A break and close above this could lead give us another “trade” but this pattern is somewhat broken.
Amazon (AMZN) after four days of rest, the stock got back in motion yesterday as it broke above the short-term resistance of $302.00 to go as high as $304.65. Holding above the break out level of $302 would be constructive for additional gains.
Baidu (BIDU) is building a nice upper level floor at $141.30 after a few days of rest to digest its impressive breakout on Wednesday last week. The stock put in a small bottoming tail yesterday, so look for potential upside momentum above yesterday’s pivot high of $143.93.
Google (GOOG) had a decent move in the past few weeks. It’s trying to hold higher and needs to stay above $881ish to stay interesting.
Green Mountain Coffee (GMCR) gained almost 2% yesterday to close back above its 8-day moving average. The stock has been building a nice upper level wedge that could resolve to the upside above $86 and get some momentum once again.
Tesla (TSLA) is still digesting above the 21-day MA without any real interest- but this stock hates to sit around. There is some news out this morning that the company will try to build self-driving cars itself, but technically it really needs to get and stay above $170ish for new move towards $200 to start.
The 2x Inverse Bond ETF (TBT) should be in focus on today’s Fed announcement. I don’t think the highs of this ETF are in. Even if rates stabilize a but for the rest of 2013, I think next year we will continue to see them rise. I think dips are buyable, but your returns on a leveraged ETF like TBT will decay the long you hold it, so perhaps consider TBF for the drawer.
The metals’ move from the June 28th lows was nice while it lasted. Recently they grew faulty again. Gold (GLD) is at new weekly lows and the downtrend for 2013 has been technically sound. There is small micro support in the GLD at $123.50 then the lows $114.68.
I typically do not like to trade aggressively on Fed days because the back and forth movement sometimes seems a bit random and driven by predatory machines. Know your levels and know your time-frame. Equities have been the place to be this year if you learned how to understand and navigate them.
Disclosure: Scott Redler is long GS, BAC, FB, SSYS, GMCR, ZNGA, BBRY calls. Short SPY.