World markets are mixed but the prevailing tone is negative. European markets are down almost what they were up yesterday. Asia is mixed with the Nikkei standing out down 2%. Because we are in a headline driven tape, we are getting lots of random and choppy action. I think it’s starting to set in that the circus in Washington is not going to be a quick fix.
S&P futures are down 10-12 handles after closing on the highs yesterday, making for a complicated trade. I imagine some shorts got squeezed into yesterday’s close and some longs got a bit more comfortable as some leadership names acted well. It felt like the markets seemed somewhat okay with the present circumstances in Washington, but worries could grow about the debt ceiling, which is a much more important issue.
What I usually do with this type of open is wait for a quick 15-30 minute low, and try to nibble a bit more vs. those. If buyers come back, perhaps you could add. If it’s a trap and gaps don’t get filled, I usually look to hit out at that low and salvage my trade then wait for a better set-up. If it’s a longer-term trade, follow your own parameters but be conscious of whether the reason you bought that stock has changed.
SPX has some support at 1682-1684 then Monday’s low of 1674. The 100-day MA is 1660ish. Resistance sits at 1690 then 1696, with a bigger zone at 1703-1707.
In today’s Morning Call we will look for potential opportunities in high beta tech names, which have been the place to be over the past few months. Some woke up with a Day #1 type moves yesterday.
Google (GOOG) had a nice gap and go yesterday to register 1.25% gain and close back above its 100-day moving average after the calculated Red Dog Reversal at $871 on Monday. Look for potential continuation above yesterday’s high of $887.67. GOOG needs to hold $880 this morning to continue to look good.
Apple (AAPL) found good support at the 50-day MA on Monday, then a nice gap and go yesterday lifted the stock up 2.4%. It has cleared some short-term resistance levels and the technicals started to shape up better. There is some news out that the new iPad mini might not be out for the holidays, which could be weighing on the stock slightly. I’d look to see if it can go positive this morning. If it wants to stay as an A+ type trade set-up, it should hold $480-481.50 today in my opinion.
Amazon (AMZN) has been acting best in the high-beta tech group. It broke out of the tight upper level base on good volume yesterday and closed on highs to show commitment. Look for potential upside follow-through above $321.
Sina (SINA) had a nice push into the close to clear the short-term resistance of $83.60. The stock had impressive gains of 4.67% and closed on highs, signaling the potential for upside follow-through above yesterday’s high of $85. Next resistance stands at $87.86 from 2013 highs. Overall, the chart looks good and SINA has the potential to make new highs.
Zillow (Z) had a nice Red Dog Reversal at $83.62 yesterday after getting hit for the past two weeks. The stock went as high as $87.82 and closed on highs to log a 3% gain. The next obstacle is the 50-day at $88.85. Z could be a candidate to go positive for cash flow.
Trulia (TRLA) also had a nice day with a 2.5% gain after finding support at the 8-day earlier this week. The stock had a nice bottoming tail at the 21-day, flashing a buy signal. A break above $48.50 could trigger the next round of buying. It needs to hold $46.29 to maintain composure.
eBay (EBAY) is working on a 10-month channel that looks like it could resolve higher with a break above $57. The stock doesn’t trade well but could be a potential hold for swing traders as it’s trading above all key moving averages and showing relative strength in the past few weeks. Potentially use $55 as an upper level stop.
Tesla (TSLA) is trying to build a high-level flag but was downgraded this morning. Let’s see if it holds the 8-day MA at $186.78. The next support level would be the 21-day MA is $176.45
Facebook (FB) is trying to digest after a big move higher. Let’s see if it can stay above its 8-day MA at $49.23.
Sector analysis can help give you clues to future market direction. The banks have been weighing on the market, see if they can hold in today or whether they continue to be a source of relative weakness. The Financial Sector ETF (XLF) has important support at $19.79.
For the Homebuilders ETF (XHB) important support is $30.16.
The Russell 2000 ETF (IWM) made new highs yesterday, see if buyers keep this strong sector intact. The 8-day MA sits at $106.77.
The Nasdaq ETF (QQQ) closed at 2013 highs. The 8-day sits at $79.02, which would be the first level to watch.
Metals are trying to bounce today on the futures’ weakness, but still remain very broken.
Gold (GLD) is up very small after getting hit very hard again. It doesn’t look very interesting and has resistance at $125-126.
Overall everyone needs to realize we are in a headline-driven tape, a very random tape. This is a time to measure your time frame and keep risk lower. Having low gross, low net exposure always makes sense in times like this until there is more clarity.
Disclosure: Scott Redler is long AAPL, GOOG, EBAY, JPM, ZNGA. Short SPY.