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Minyanville's T3 Morning Market Call: Can S&P Sustain 1500 Level?


Notable earnings today include Caterpillar, Yahoo, and VMware.

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US stock futures are up slightly Monday morning as the S&P looks to build on a strong start to 2013. There are lots of headlines focusing on S&P 1500 this morning, with many focusing on the negatives rather than the positives. I do not buy into the "bubble" argument, but that doesn't mean we can't see a decent pull-back. Bull markets can stay overbought for a while, though, so don't use that as your sole rationale for looking to short this market.

To this point, the price action in 2013 has been very methodical. We had a big gap up to start the year after the fiscal cliff deal was ironed out at the last hour, and since then it has been a slow grind higher. We have seen healthy digestion followed by some muted momentum to the upside, which has been a bit frustrating for day traders but very constructive for swing traders. The first obstacle for the S&P was 1474, which was taken out with ease. The next was 1500, which we took out last week. Earnings have been good enough to hold the market at higher levels, despite persistent weakness from former leader Apple (NASDAQ:AAPL).

The S&P 500 ETF's (NYSEARCA:SPY) 8-day moving average has been providing a solid road map for traders, and now stands at $148.73. When the index ETF does get stretched a bit away from its 8-day moving average, it can act as a bit of magnet to provide some rest. The next pivot resistance to watch is $150.25.

It's always hard to initiate new positions when you are up 11-12 sessions, but that doesn't mean the market is a short. We have a two-day Fed meeting this week, and it will be important to see if language changes at all. In the most recent Fed minutes, there were suggestions by several Fed governors that the FOMC could look to end QE asset purchases in 2013, an idea that briefly spooked the market a little bit.

Earnings continue to roll out this week. Last week we saw strong reports from Google (NASDAQ:GOOG) and IBM (NYSE:IBM), and then a blockbuster report from Netflix (NASDAQ:NFLX) that has sent the stock up almost 70%. AAPL is still in the dog house but the market has been able to sweep it under the rug. The new pivot to watch is $435-438.50.

Notable earnings today include Caterpillar (NYSE:CAT), which reported a large impairment over a recent acquisition but is trading higher pre-market. After the close today, we will see Yahoo (NASDAQ:YHOO) and VMware (NYSE:VMW) report.

Tomorrow before the open, we will see AK Steel (NYSE:AKS), US Steel (NYSE:X), Peabody Energy (NYSE:BTU), EMC Corp. (NYSE:EMC), and JetBlue (NASDAQ:JBLU) among others. After the close, the notable reports will be Amazon (NASDAQ:AMZN) and Broadcom (NASDAQ:BRCM).

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Scott Redler is long LNKD, MGM, GE, DBC, WFC, TBT. LNKD calls. Short SPY, GS.
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