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Minyanville's T3 Morning Market Call: Futures Bounce Off Pre-Market Lows Amid China Weakness, Sequester Worries


The tech sector continues to be a mixed bag, with Apple remaining very weak.

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S&P (INDEXSP:.INX) futures have rebounded from pre-market lows and are currently down only about two handles as this choppy wedge pattern continues to develop in the index. In the last week and a half, ranges have increased significantly and there has been good two-way action. There is a lot of debate in the technical community about which direction this pattern will resolve, but we will be patient and let the price action do the talking.

Chinese markets were under pressure overnight as the government tightens monetary policy in response to soaring property prices. In addition, the sequester continues on after the March 1 deadline, and the longer the spending cuts are in place, the more significant the economic toll will be. In the media now, they are talking about the potential for 700,000 job losses and a .05% reduction in GDP. Japan continues higher but is off session highs, and European markets are also a bit soft across the board.

(See also: An Officer and a Babysitter: Two Personal Stories About the Sequester.)

While watching the indices can give you clues about which side of the trade to be on, a stock specific approach is best in this environment. S&P support stands at 1501. If this area doesn't hold--especially if we close below it--traders will start to believe we could see a test of the 1485 level. If Friday's high doesn't hold, then resistance stands at 1520, then 1525, and then pivot highs at 1530.

Tech continues to be a mixed bag.

LinkedIn (NYSE:LNKD) continues to be best-in-breed. There have been many spots to trade for cash flow, but at this point no real set-up.

Google (NASDAQ:GOOG) is another high beta tech leader. The stock has done some nice work now above $800. If it gets above $808.41, you could look to it for an additional cash flow momentum trade.

Netflix (NASDAQ:NFLX) still hangs tough. It's been a nice hold since earnings and a great trading vehicle. NFLX needs to close above $192.20 to make an attempt to get through $200.

Yahoo (NASDAQ:YHOO) has been a nice stock to own since $16.60 as Marissa Mayer gets the company back on track. Last week it gave us a cash flow opportunity above $21.45.

Facebook (NASDAQ:FB) finally woke up a bit on 2/28 we had a nice entry using the Red Dog Reversal technique around $26.70. Next we had a decent move above $27.30. I'd like to see that area hold for a bit before the stock then perhaps gets back in motion. FB needs to get above $28.10 for some real upside traction.

Amazon (NASDAQ:AMZN) is trying to hold its 50-day. If that continues, perhaps we could get another trade above $267ish.

Apple (NASDAQ:AAPL) has remained very weak. Tim Cook didn't say anything at the investor meeting that we hadn't already heard so the stock didn't react well there. Some traders made money when the $440-435 support area broke. Friday's pivot low to watch is $429.98, but the next significant support is $420 then $408.

Banks started to trade a bit more rather than just grind to the upside.

Goldman Sachs (NYSE:GS) broke its recent melt-up trend and started becoming more of a trading vehicle last week. The stock held $147ish, and for it to start getting back in upside motion it will need a move and close above $152.50, in my opinion.

JPMorgan (NYSE:JPM) held in better than some banks in this recent volatility. The longer it stays above $48 the better the probability it could take out recent highs of $49.70ish.

Bank of America (NYSE:BAC) had a nice move from $8ish through $9.95, and then after hitting $12.42 it started the corrective process. Most intermediate-term traders would like to see this hold $11 area.

Retail started acting better in recent weeks.

Home Depot (NYSE:HD) is at historic highs but there is no real set-up.

Wal-Mart (NYSE:WMT) has been choppy, but if it can get and stay above $72, it could see higher prices.

Target (NYSE:TGT) absorbed recent earnings and acts better.

Nike (NYSE:NKE) is flagging well above $54. The stock needs to get above $55 for some better action.

Michael Kors (NASDAQ:KORS) finally found some footing since the recent secondary. It needs to stay above $57 to stay intact.

Refiners have been on tear. I have not been involved unfortunately. Check out charts of Calumet (NASDAQ:CLMT), Western Refining (NYSE:WNR), and Marathon Petroleum (NYSE:MPC), these have seen very powerful moves and basically no pullbacks.

Homebuilders (NYSEARCA:XHB) are showing some mixed signals, but overall the ETF has held longer-term trend lines and seems like it's just in basing mode with some small trades. XHB needs to hold $27.80 in order to stay constructive.

Metals are trying to hold macro support. If you are a long-term holder in the Gold ETF (NYSEARCA:GLD) I would make sure the $148-150 area continues to hold or else reevaluate.

I still remain more tactical than portfolio-inclined based on last week's action, but I do have some longs on that have ignored some of the recent faulty action. I will be on my toes by adding to my SPY short if it see some deterioration.

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Scott J. Redler is long GOOG, FB, BAC, WMT, YHOO, NKE, F. Short SPY.
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