Market Needs Fear, Capitulation for a Tradable Bottom

US stock futures are turning lower Thursday morning after earlier pointing to a higher on Wall St. Greece’s seemingly inevitable exit from the Euro zone, and the implications of that move, continue to dominate the discussion.

This correction has been death by 1000 cuts as the News out of Europe continues to complicate the headlines. I don’t think the rhetoric that Europe wants to stay unified is believed. Most at this point know that Greece can’t stay in the Euro as ECB stopped lending to some Greek banks. Spain continues to be a problem as their debt sale was soft, but not a disaster.

At this point most traders are frustrated as from experience we know in order to have a “tradable bottom” you need acceleration and fear, not this slow grind lower. At this point turning on the TV in the morning and seeing the futures down 12-18 handles would be much healthier than these slightly lower or slightly higher opens.

The S&P is almost at the macro target I set forth weeks back, which is the 38.2% Fibonacci retracement (1318-1322 is that zone!). Yesterday’s low was 1324, use that as the morning pivot. It would be nice to see an early morning flush through that point to help create an afternoon rally as I’m sure the forces at will would love a decent environment for the first day of Facebook (FB) trading tomorrow.

1312 is another point of reference. If we do see some type of flush today I will look to be a scale down buyer into this support. 1295-1305 completes the Measured Move of the Head & Shoulders Pattern that gave us a nice road map to trade this correction. The 200day MA stands at 1280ish, which is also around the 50% Fib Retracement.

S&P resistance sits at 1336-1339, with a bigger area that stands at prior pivot of 1343-1347. 1360-1364 is now the macro line to the upside.

There are not many patterns to consider as most stocks are in correction mode and I don’t see tight set ups to consider from the long side. Most tradable patterns have been to the short side as stocks continue to break down.

Google (GOOG) is one of the few patterns that were worth considering triggered yesterday through $617, and it looks good. The stock is acting much better since all the Facebook talk. All in all, it held the 200-day for macro investors and is finally a better vehicle for traders as well.

Expedia (EXPE) also had a decent pattern that started to get in motion yesterday as it held most of its earnings gap.

Apple (AAPL) has been a focus from the short side and has worked well. The first short was outlined back at $620, then recently below $560-555. At this point it seems to want the 100day moving average, which should be buyable. Yesterday’s low is $541.04 to trade against, but the compelling zone to put money back to work long here stands around $520-527.

Priceline (PCLN) seems to have a date with $620-630 zone, which coincides with its 100day.

EBAY and Amazon (AMZN) have similar patterns. Surprisingly positive earnings with an earnings gap still intact. AMZN is a short below $220 and a buy above $230-231 with volume. EBAY needs to hold $39 for a potential momentum trade above recent range of $41-42.

Banks were very weak yesterday and all closed on their lows.

JP Morgan (JPM) broke the reactionary pivot from the news. Now there is talk that their $2 billion loss is already $3 billion. Next big support is $34 to test some longs.

Morgan Stanley (MS) remains broken and in trouble like it’s been most of this year. Perhaps the $13 level is buyable support. I would focus on buying the leaders though.

MasterCard (MA) has been a sale ever since breaking its uptrend we isolated at $440. See if the 100day is buyable around $400-403.

Visa (V) looks vulnerable for a move down to $111-112 area.

Gold (GLD) held the December pivot low and is up a bit this morning, see if there is commitment in first 30-60 minutes and maybe you can see GLD $152-154.

Facebook talk is everywhere. Unfortunately the investment banking world had a piggy-piggy approach approach and slapped such huge valuations on it (is it that surprising?). The greed of the deal will probably keep it from providing much opportunity in the aftermarket Friday or in the weeks/months ahead.

At $38ish it’s 100 billion. Some guess it could open at market cap of 150-200 billion. The same multiple for AAPL makes it a 3 trillion market cap, $3,000 stock price, while right now its market cap is $500 billion. That open would also give it almost the same market cap as GOOG. Seems hard to sustain for a company with an unproven business model. IPO’s are usually about supply and demand, so perhaps not a smart short. Unfortunately they are messing with that by expanding the size by 25+% percent. And they wonder why people hate Wall Street.

Disclosure: Scott Redler is Flat

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