Debt Deal Done, but Appears to be Priced-In as Futures Lower

The headlines read “Obama signs budget deal, government to re-open Thursday.” I think in the last two weeks, let alone the last two years, we’ve heard every type of metaphor for the word “catastrophe.”

The fear mongers do everything they can to scare the investor out of the market rather than helping them create a process to approach it with a plan. Unfortunately that’s the world we live in. However, the over-emotion does create opportunities for those who can drown out the noise and read the charts and price action…

Monday was the tell-tale sign that very few people thought default was a real possibility. S&P futures were down 14 handles and Asia and Europe yawned. We held above Friday’s lows, creating a new pivot at 1692, and then went green during the session.

Yesterday the market pushed sharply higher to 1721 yesterday as it became a apparent that a deal was going to pass through Congress. Now it’s Thursday, the news is official and the futures are down 4-5 handles.

We now have have support at 1715-1716 then 1707ish. If the market can digest above 1700-1707ish, I see no reason why the 2013 highs of 1729 can’t get paid a visit pretty soon.

There have been lots of great setups and rotation during this “crisis” period. All you had to do is pick a time frame and approach. If you are a macro investor you now have lived through 1987-1998-2001-2008-the European debt crisis-the Mayan end of the world-Syria-debt ceiling-fiscal cliff-government shutdown-then debt ceiling again.

In today’s Morning Call we will highlight the banks again that helped lead the market yesterday.

Goldman Sachs (GS) regained some momentum after a clean break out of the bull flag pattern at $160 yesterday. The bank registered 3% gain. HOWEVER, GS is out with earnings this morning and they are very disappointing. The stock is currently trading down around 2% pre-market despite raising its dividend from 50 cents to 55 cents.

JP Morgan (JPM) also cleared some short-term resistance levels with a 3.23% move up yesterday. It has reached our intermediate-term target of $54. Now holding above $53 would keep its momentum intact.

Bank of America (BAC) also enjoyed a 2.25% gain yesterday as the bank extended higher. It has room to $14.83 until it reaches the next resistance area. This stock could make new 2013 highs and my projection for 2014 is $18-22.

Citigroup (C) was the winner in this sector as the bank soared 4% to almost fill the gap from September 23th. Look for potential upside follow-through after a potent move, although GS could be a drag. A pullback into $50 area could be buyable.

The Chinese internet names continue to give multiple opportunities.

Qihoo (QIHU) has been traveling in a descending channel for the past month. The stock has been holding higher and looks poised for a potential brea above downtrend resistance at $87.90.

Sina (SINA) has an upper wedge pattern in place. A move through $88.23 could lead to upside resolution. Continue to use the 8-day ema as your key support level to watch.

Sohu (SOHU) has been wrapping around its rising 8-day ema. The longer it holds above the recent support floor of $80ish, the higher the probability we could see a retest of the pivot high of $87.29

Soufun (SFUN) also has a tight upper level base above the 8-day ema at $50.60. A break above $52.60 could open the door for higher prices.

Some other names worth highlighting.

Facebook (FB) continued to hold higher after quickly reclaiming its 8-day ema to repair the damage from last week’s potent sell-off. The stock is already back at highs and looks poised to potentially make another leg higher above $51.60.

Boeing (BA) has been inching higher and briefly broke above the prior all-time high of $120.38 yesterday. Look for potential upside follow-through above yesterday’s high of $120.66.

Starbucks (SBUX) continued to build its upper range. The stock gained 1.73% yesterday and looks like it could be setting up for a potential breakout at $78.32.

SolarCity (SCTY) continued its short squeeze and gained another 12.55% yesterday following its monster move on Friday. The stock is up another 3% this morning after a big upgrade at JPM with a $68 price target. The bull flag set up triggered yesterday at $48.20ish now all-time highs could be just around the corner.

Tesla (TSLA) acts okay and holding above $179ish could lead to another move above $187-189 for a move back to highs.

IBM (IBM) earnings were not well-received, to say the least. In our 2013 thesis we talked about IBM as potentially a bad spot to be long. It’s back at 2013 lows right now. Stock selection matters. I’d still avoid, but active traders could look for potential opportunities vs. the 30-minute lows.

eBay (EBAY) also continues to frustrate as their earnings were disappointing. The channel continues. See how it handles the lower end of the channel, which is around $50ish. If that holds, perhaps you could buy vs. that.

Tonight we have Google (GOOG), among other names, reporting earnings. I am not taking an option strategy here, but its channel is long and if it has a good report a break above $920 and could help it become the next $1000 priced stock. I don’t take stock into earnings, so know your time frame here.

It’s good to be back from my travels, and it’s always great to meet market participants around the world who are eager to learn a process and approach to trading. I will say the VTF was such a helpful tool for me to manage some positions and feel comfortable breaking out the trading laptop in a foreign land. The VTF truly keeps you updated and “in the know.” Technology is a beautiful thing.

P.S. Perhaps Washington should start talking today about the new budget so we can avoid this type of situation early next year. Now they have some time to actually get something substantial done.

Disclosure: Scott Redler is long an AAPL call spread

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