Minyanville's T3 Morning Market Call: Futures Shrug Off Italian PM Monti's Resignation

By T3Live.com  DEC 10, 2012 9:40 AM

Plus, a look at tech, homebuilders, and gold.


Italy seems to be the source of most headlines as Italian Prime Minister Mario Monti confirmed he would be resigning from his post. It’s not the biggest surprise, but the media will beat up this story and put Europe back in view for a bit. The next European leaders’ summit is 12/13-12/14, so look out for that. Today futures are bit softer but nothing extreme—we’re down 2-4 handles as markets continue to take some of these headlines in stride. There are some micro resistance points at 1423 and then 1435.  It does seem like this lethargic targeted trade will be supported into year end. There is some micro support at 1408-1410 for now with a bigger level at 1397.

On the “fiscal cliff” side, President Obama and John Boehner had talks, but nothing substantial or new came from it. The market seems less affected by the daily headlines on this subject as most think something will be done in the last hour, or early next year with the “boomerang” thesis.

The Fed decision comes on 12/12 and will be the last decision of the year.  This is an expanded-format meeting with a Ben Bernanke press conference and new forecasts.  The expectations are for the FOMC to raise the QE3 monthly purchase pace (now $40 billion per month) to account for the expiring Operation Twist (worth $45 billion per month).  Most people assume QE3 will be raised to ensure purchases stay at the current $85 billion/month rate for at least the start of 2013.

Overall it’s been a very calculated trade since the November 16 low of 1343.   The first move had a lot of participation up to the 1420ish level. Since then it’s been a very targeted trade with many divergences for traders to deal with. Dip buyers have supported the market in the 1400 area during the past two weeks and on Friday the S&P (INDEXSP:.INX) finally closed above the 50day (but not with much authority).

Tech is a very mixed bag.

There are a lot of tough questions being asked about Apple (NASDAQ:AAPL) right now, and rightfully so.  The first move from $705 down to $505 rattled investor confidence. Then we did see a nice tradable bounce that started November 16 back to the 200-day MA around $594. Since then it had a violent move back down to lower support, a move that was quicker than bulls would have liked to see. On 12/06 the stock put in a decent reversal for a trade that quickly got almost engulfed on Friday. The environment for AAPL right now can be very dangerous and violent for those who are not trained to handle swings like this.

Huge gyrations are usually a signal of institutional selling, which is never a good sign. I would be very cautious on every time frame. Measure your risk and commitment to this stock. Recent support is $505-518. A trade and close below this level opens the door for a quick move to $480 and then perhaps the $430 area.

(Here is the Wall Street Journal article where my views on AAPL are quoted extensively.)

Google (NASDAQ:GOOG) had a decent move but turned down on Friday in front of the 50-day—this chart is also a bit damaged and I would watch the $680 area as important support.

Amazon (NASDAQ:AMZN) was probably the strongest high beta. Doing some work above $250 after a major move from $220 is constructive. The spot to use as a short-term pivot to trade against is $255. Priceline (NASDAQ:PCLN) is choppy and closed on the lows Friday. Recent support is $650-$654.

eBay (NASDAQ:EBAY) is still holding up but not very choppy. Important upper support is $51.

Yahoo (NASDAQ:YHOO) is still acting well since the $16.60 breakout and then it held $18.50 well. Trim and trail.

Oracle (NASDAQ:ORCL) and Cisco (NASDAQ:CSCO) lately are the strongest mega cap tech names. Intel (NASDAQ:INTC) is trying to get some traction but is not so compelling.

Facebook (NASDAQ:FB) gave traders/investors a nice move from $22.50-$24.25 targeted trade up to $28.88. Now it’s absorbed that move well.  A move and close above $28-28.88 could open the door for additional moves back to $32ish.

LinkedIn (NYSE:LNKD) cleared $108 and looks okay for those fans of the stock.

Banks gave us a nice move last week. Bank of America (NYSE:BAC) was the focus on our Price Point Sheet and Off the Charts newsletters last week and then JPMorgan (NYSE:JPM) played some catch up on Friday. Trim and trail this group. Goldman did say US banks should be a constructive place to be for 2013.

Transports (NYSE:IYT) are in a very tight descending channel. It’s been a long one—typically a channel with that length that gets resolved and turns into an interesting trade. The longer it stays above $90 the higher the probability for an upside break through $96ish, but it’s slow.

The Industrials ETF (NYSE:XLI) also looks good as it’s getting back to highs.

The Homebuilders ETF (NYSE:XHB) is bit lethargic now, which is confusing.

Metals are not very interesting but they did hold lower support. Important support is $162-164 for Gold (NYSE:GLD) as we move forward.

A lot of market participants I talk to are not doing much, as we could go higher but the trade isn’t compelling. Will be get a Santa Claus rally or will the fiscal cliff situation present a headwind?

If we can work through the fiscal cliff issues and economic data continues to improve, there could be some great trading in early 2013.

Scott J. Redler is long BAC, JPM, YHOO, INTC. Short SPY.