Markets Coiling for Big Move–But in Which Direction?

There are so many conflicting stories, opinions and strategies being floated in Europe right now, and the markets are bracing for the next two weeks of market-moving events. As headlines grow more complicated and the equity markets are coiling–it feels like a big move is coming soon, and everyone seems to think they know which way it has to go. I sometimes have a strong Thesis or can help handicap the direction, but I have no strong conviction as of now.

I do know that all the problems we face are complicated and the stimulus game hasn’t worked, but the question is: can the big guns fire one more “Bazooka” to buy time and give us another rally based on hope/stimulus? Will this set up a bigger potential doomsday scenario down the road that doesn’t seem so farfetched.

My common sense inner voice gives me an uneasy feeling every time I read about what is truly taking place in Europe. The Tax Evasion, the Broken Entitlement system, the culture differences – the lack of a Fiscal Pact and the lack of Commitment to enforce any measures that have already been set. The fact that all these nations want to abandon the Austerity measures they agreed to in order to get funding and go back to the ways that got them in so much trouble is despicable, and so is the fact that the stronger ones are bending and letting it happen. The Eurozone went from throwing good money after bad, to throwing bad money after garbage. It feels like the world doesn’t believe in accountability or tough love. Short term easy decisions lead to much bigger problems (my Grandma would be pissed). I also think the short-sighted nature of politics plays a huge role in these policy decisions, which is why we should have strict term limits for all politicians.

ANYWAY—I will not make big bets and I’ve been just tactically maneuvering both long and short the last few weeks. I’m ready to jump on a direction as I get more clarity. Here is my dummied down plan:

If the S&P breaks and closes below 1306-1309 the downside it will intensify the sell-off, and uncommitted longs will get out of the way (this would be a spot to short). You have small support at 1295ish then 1266 was the pivot low. I will revisit other potential levels if this gets in motion.

If the S&P breaks above 1335-1340, uncommitted shorts will cover and some momentum guys will come in (this is a spot to buy). The 1356-1360 level would be a decent spot to reach (I will talk higher levels later if this transpires).

Most sectors and stocks have defined support and resistance that we can trade against as the markets will tell us the next short term direction. Unfortunately it will probably resolve overnight! The only way to participate is with some risk on – either long or short. I suggest the use of options so your risk is defined and premium is paid.

Apple (AAPL) can give clues. $579-581 is big resistance, if we break above there with volume and commitment perhaps range is getting resolved to the upside. If it breaks $566-569 it can correct further that will then give us downside clues.

VIX was decent to watch yesterday as its divergence pointed to afternoon market failure.

Gold (GLD) still hangs under intermediate resistance levels. It put a “lower high” in yesterday, but that’s not so important. A BIG move over/close over GLD $159 will put this in upside motion.

Disclosure: Scott Redler is flat

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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