Prepare Scenarios for Fed Announcement

There are green arrows around the world this morning as indices align for the first time in a while. Europe is up about a half a percent across the board, the Nikkei leads Asia up 2.02%, and S&P futures are up 4-5 points as we head into the Fed decision.

The number of economists looking for the Fed to taper this month has doubled but only to 34%. WSJ Fed commentator Jon Hilsenrath actually puts the odds at 60%, but ultimately they are all just guesses.

I think the best outcome would be no Taper but a more hawkish statement that puts the Fed on a clear path for a taper in January or March. If they taper today, we could see a sharp first move down, but at some point I think we find support as investors realize this is a positive step. If they don’t taper and give a very hawkish language, there could be some smaller false moves, then we can see a lot of the same into the New Year.

Some support areas to watch in the S&P are 1772 (recent pivot low), 1765 (50-day moving average), 1740ish (measured move of the H&S pattern). There is some Resistance at S&P 1792, 1803 and then 2013 highs of 1813.

In the last two weeks there’s been a very controlled pullback with a lot of individual stock action both ways. We could see a lot of that into year-end. Read the Morning Note, Off the Charts, the Price Point Sheet if you want the individual technical set-ups. We will also have our 2014 thesis out soon.

In today’s Morning Call we will look at the banks as sometimes they are active on Fed Days.

Bank of America (BAC) broke below its 21-day EMA after last week’s pull back, but the bank has been trying to hold the new support floor at $15.12 for four days. The longer it holds above this level, the higher the probability it could see a bounce. A break and close above the 8-day EMA at $15.31 could bring in some buyers.

Goldman Sachs (GS) showed some relative strength among its group as it has been holding higher since last Thursday when it held the 21-day EMA. The stock has reclaimed the support of all key moving averages. A break above $172.20 on good volume could lead to some additional upside momentum. I’d keep a close eye here today.

JP Morgan (JPM) continued to build a base around its 21-day EMA. However the stock showed some relative weakness yesterday. Now it needs to hold the recent pivot low of $55.60 to avoid additional selling pressure.

Citigroup (C) has been lagging since its breakout failure at $52.50 and has now lost the support of its short-term moving averages. The recent pivot low is $50.27 where the 100-day comes into play. Below that we have the uptrend support at $50ish.

We will also give you a free glimpse at some of our recent Off the charts ideas that have been moving.

Michael Kors (KORS) has been holding above its 8-day EMA since break out at $82.50, showing commitment to the upside. A break above the recent pivot high of $83.91 could bring in more buyers.

Under Armour (UA) has a tight pattern as the stock has been hovering at highs. It triggered our listed buy price of $83.75 on December 11 and looks poised for a potential next leg higher above $85.

Groupon (GRPN) broke above the bull flag pattern at $10.62 to trigger our entry price yesterday. It has some resistance at $11. A break and close above this could relieve some selling pressure to open the door for a move back to highs.

Yelp! (YELP) cleared its downtrend resistance that has been in control since October with a potent break out at $66 yesterday. The stock logged a 4.5% gain. Look for potential upside follow-through above yesterday’s high of $67.47.

Voxeljet (VJET) broke below $36 to resolve its bear flag pattern that was highlighted on Monday’s newsletter. The stock doesn’t have a real support until $32 which is our target area on the idea.

Tesla (TSLA) buyers came back again after two days of rest. The stock has been acting well since it triggered our entry price of $142.50. It broke and closed above the 50-day yesterday, so the next resistance stands at the 100-day at $156.50.

There are also other names that keep providing opportunities.

Apple (AAPL) is down sharply on news that the China Mobil deal is actually not done. I’m not sure why so many definitive reports were out there, but I ultimately think this could provide some opportunity. Support #1 is $546ish then the prior high around $538ish. I don’t have any position here but will measure levels to see if there is any support.

Amazon (AMZN) continued to find support along its 8-day EMA but had a lack of traction yesterday. See if it could get some upside momentum above $391.70 after a day of rest.

Facebook (FB) showed resilience as it continued to hold higher after putting in a new all-time high at $55.18 yesterday. However the stock looks very extended from the 8-day EMA. Use yesterday’s high of $55.18 as the new point of reference. This stock has has been a great vehicle since the Red Dog Reversal at $44.04 on 11/26. Since then it has given us multiple buyable set-ups. Now actively use $55.18 as the new action pivot.

Twitter (TWTR) had some downside follow-through yesterday after having a Red Dog Reversal at $59.41 on Monday. The stock went as low as $54.62 before dip buyers stepped in. Some digestion above the 8-day EMA at $53.40 could keep its momentum intact. It probably needs some time to base now.

Google (GOOG) tried to re-group the last two sessions after a mini move down from 1092 to 1057. There is still no real set-up, but it looks okay as long as it holds above that area.

I do think the 10-year could get to 3.25% by first quarter next year.

The 2x Inverse Treasury Bond ETF (TBT) has recent trend support at $76.75 and a close above $79ish could get it going again to the upside.

Gold (GLD) has been a “sell any bounce” play for all of 2013 and remains caught in a nasty downtrend. There is some support at $118 – a break and close below this level could send the ETF back to the June lows. On the flip side, a break and close above $121ish could squeeze some shorts.

I typically don’t love “Fed Days” – there are often lots of false moves and random/erratic action. You could trade extreme ends in that first 30 minutes, but the better action sometimes comes in the last 30 minutes of the day, or the day after, so be patient.

Disclosure: Scott Redler is long SPY, GS, BAC, NUAN, TSLA.

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