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Minyanville's T3 Morning Market Call: Futures Erase Afternoon Bounce as Fiscal Cliff Looms

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This is not the type of action that traders want to see during the final few days of the year.

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The roller coaster continues as futures were set to open sharply lower this morning following yesterday's afternoon comeback. Lawmakers are planning another round of fiscal cliff talks, but a deal does not seem imminent. In this type of headline-driven tape, it's best to pare down risk and wait for more calculated opportunities.

Apple (NASDAQ:AAPL) flirted with major support at $501.23 yesterday, but staged a strong bounce. Use today's high and low as short-term points of reference.

LinkedIn (NASDAQ:LNKD) held up well in upper level base yesterday, and continues to show commitment to upper levels. It could be one stock to turn to when the market firms up.

Google (NASDAQ:GOOG) has been in a calculated mini-downtrend into the 21- and 100-day moving averages. When the market firms up, it could be another stock to turn to.

Amazon (NASDAQ:AMZN) was headed for a second straight sharp sell-off yesterday before the reversal. It closed back above its key support of $246.65, but will face a test again today as it opened below that level.

International Business Machines (NYSE:IBM) is in a controlled mini-downtrend and showed relative strength yesterday. If it breaks out of that mini-channel, it could see some more upside.

Baidu (NASDAQ:BIDU) couldn't follow through on Wednesday's bounce and may need more time before it breaks out of this mini-lower base.

Facebook (NASDAQ:FB) sold off hard in the morning yesterday and couldn't muster significant bounce. The stock could see more downside below yesterday's low.

Salesforce.com (NYSE:CRM) has a similar look to AMZN, breaking down out of upper level base after an impressive move. Watch yesterday's low.

Banks recovered well yesterday, but opened lower this morning. The sector could be sensitive to the fiscal cliff, so watch yesterday's lows in Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM). If you are looking to short the banks on fiscal cliff worries, I think you focus on those two stocks and not Bank of America (NYSE:BAC).

Netflix (NASDAQ:NFLX) held its 21-day moving average yesterday and is in a controlled mini-descending channel. It's another laggard stock that could benefit from the January effect. This is another name to watch if the market firms up, in my opinion.

The precious metals showed some life yesterday. Watch to see if that continues today with gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV). Oil (NYSEARCA:USO) is also bouncing after a tough year overall.

This is not the type of action that traders want to see during the final few days of the year. S&P futures are down about 10-11 handles, erasing almost all of yesterday afternoon's rally that was triggered by news that the House will reconvene Sunday. Some shorts are probably frustrated about getting squeezed yesterday, and anyone who dabbled with longs yesterday thinking the afternoon rally would relieve some pressure are also stuck. At this point, there has been plenty of technical damage over the past few days that would warrant less risk and a more wait-and-see approach.

Over the past few sessions I have been stopped out of a few of my trailers, going from as many as eight long positions down to three now with a SPY hedge, as stocks have started to give up their intermediate support levels. Depending on the outcome of the fiscal cliff, this is the type of action we could see for the first couple weeks of 2013, too.



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Scott Redler is long AAPL, BAC, YHOO. Short SPY.
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