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Minyanville's T3 Morning Market Call: Markets Continue Comeback After Brief Dip


If you're an investor, continue to have a select focus on the strongest names on pullbacks rather than spreading yourself thin.

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For most of 2013, if the market ticked down and you blinked, you missed the entirety of the "pullback." For the first time this year, there was finally a tradable short from Wednesday into Thursday morning. If you called in sick on Thursday, you missed the best opportunity this year to get a discount on stocks.

The S&P (INDEXSP:.INX) pulled in about 30 handles from the highs of the year, which stand around 1530. Friday the markets bounced probably a bit more than those hoping for lower prices would have wanted. World markets bounced back overnight led by a 2.4% move in Japan's Nikkei (INDEXNIKKEI:NI225). S&P futures are up six or seven handles pre-market, and we are safely back above the 8- and 21-day moving averages.

I would not rush to buy this up open. Instead I would prefer to let the market prove itself again and consolidate above these averages. If you covered on Thursday into the S&P's intermediate support, you do have the luxury to potentially test some shorts on this open. A close above 1518-1520 will have those who continue to play the roll-up short game a bit concerned.

We do have Fed Chairman Ben Bernanke speaking on Tuesday and Wednesday in front of Congress. His FOMC's Fed minutes played a part in last week's pullback. If he continues to strike a hawkish tone, it could once again spook the markets a bit. The Apple (NASDAQ:AAPL) Investor Day is Wednesday, and then the sequester comes into play on Friday.

Continue to have a select focus on the strongest names on pullbacks rather than spreading yourself thin. On Friday we talked about Google (NASDAQ:GOOG) and LinkedIn (NYSE:LNKD) as compelling candidates to buy on the dip, and they acted pretty well during the bounce. Netflix (NASDAQ:NFLX) was a bit weaker on Friday after some negative analyst commentary, but see how it acts after falling near its 21-day on Friday.

The 3D printing stocks have lost some of their luster, and will have to try to pick up the pieces again this morning after a weak earnings report from 3D Systems (NYSE:DDD) before the open. Those expecting a blowout quarter will be disappointed as DDD's growth rate decelerated a bit, which the stock can hardly afford at its current multiple. Despite a stock split going into effect today on DDD, the stock is down around 11% pre-market. Stratasys (NASDAQ:SSYS), which has been the weaker name in the sector up until today, is down around 6% on the DDD earnings news and set to open just below its 200-day moving average.

The fiscal cliff noise shook some individuals out of their macro plan late December 2012; don't let the sequester noise shake it up this time. Thursday morning I stated my belief that there is an 80% probability that 1530 will not be the highs of the year. I still believe in my road to S&P 1700 by 2015, but we all approach that road differently. There will many spots to switch some gears using a tier system, and we will be on top of it every day in our Virtual Trading Floor(R).

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Scott J. Redler is long BAC, GE, XHB, AAPL. Short SPY.
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