Futures Rise After Decent Spanish Bond Auction

European stocks rose for the third day in four as Spain’s auction saw “decent”, but not great demand. At this point it appears all we need is decent, rather than drastic, news out of Europe and our markets will respond well. Yesterday we saw some very specific stock action but markets did hold at least half of Tuesday’s gains, which is constructive.

We had some more earnings out last night. EBAY, VMWare (VMW), and Halliburton (HAL) are all responding well, while Qualcomm (QCOM) is on the opposite end of the spectrum. We’ve had more strong reports this morning from financials, with Bank of America (BAC) and Morgan Stanley (MS) adding around 4-6% each. That’s the way it’s been through this earnings cycle, very stock specific results.

Earlier in the morning futures were up 6-9 handles in front of U.S claims and some other data, but we have pared most of those gains. At this stage Nasdaq is around 3% off the highs and the S&P 500 around 2%. We’ve seen very tradable action, not a devastating correction as of yet.

I do think today is a bit important. Can we open up above recent resistance and hold? Or do they sell this up open (although it has weakened)?

S&P resistance is 1390-1392, then 1397-1402. I do see a mini rising channel within the overall macro pattern, but as long as we keep making higher lows, you should not try and fight the tape. I hear lots of opinions out there, and that’s what they are, opinions. They have no place in trading. Trade based on the price action alone, taking necessary hedges when the situation requests it.

I would use 1370 as a important line in the sand. If we break that or close below it. I would get more bearish/short for a retest of the 1357 low. The major support zone is 1320-1340.

The Nasdaq ETF (QQQ) held the 50day and has a nice descending channel in place, typically a bullish formation. It will be interesting to see how it plays out. It was above in the pre-market earlier, let’s if we see 60 minute commitment as well as a daily close above $67-$67.25. That action would be another feather in the bulls’ cap.

This is a time to stay with your macro/longer term ideas, and not get overly scared. If you’re a intermediate trend/momentum trader, there is more than enough action from both the long and short side that you don’t need to risk much to make money.

Example: Shorting AAPL below $620-622 as it plunged 40 points, you could have made nice cash flow to the downside. Also, buying it on the reversal strategy around $578, as it then bounced almost 40 points. Both trades were covered in detail on the T3Live Virtual Trading Floor(R), the long by me and the short by Evan Lazarus. There is something for everyone, pick your spots.

Know your time frame and Risk. Since being back from the Boston Marathon, I’m maintaining a short term approach both long and short for cash flow. I’m not ready to re-commit to a portfolio approach which did well for us from December 22 through Mid-March!

Disclosure: Scott Redler is long DNKN.

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