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Minyanville's T3 Morning Market Call: Expect Market to Work Off Remaining Overbought Reading


The key hurdle for Apple stock continues to be the 200-day moving average that stands around $600.

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Futures are around the flat line this morning after yesterday's bearish outside day/"Red Dog reversal." The oscillator is still overbought despite yesterday's move, and I expect this pullback to at least work off that reading. The S&P (INDEXSP:.INX) also just had a two-week move from 1343 back to the 61.8% Fibonacci retracement zone of 1423, so it's not surprising or unhealthy to see some digestive action. The short-term point of reference to watch this morning will be yesterday's low of 1408.46.

More than anything, now is just a time to be a little bit more cautious and flexible. We saw several push-through failures on stocks across the board that could hurt momentum in the short-term. The question now will be what retracement and support levels hold going forward. We measure the overall "speed" of a rally based on how far the market pulls back during "corrections." That is why we are diligent about mapping out key levels.

Facebook (NASDAQ:FB) saw one of the harsher reversals yesterday. The stock was up more than 3% in the morning, but reversed hard to finish the day down 3.4%. FB had been in a steep uptrend since the IPO lock-up expiration on November 14, so a pullback is healthy. Now we will have to see whether this is a "new Facebook" that can consolidate gains and continue higher. So far in its short existence, the stock has had a hard time holding higher after bounces.

Apple (NASDAQ:AAPL) staged a potent rally after reversing on November 16, but lagged the market a little bit last week as it consolidates under its 200-day moving average. Yesterday AAPL continued to rest, finishing narrowly positive while the market closed lower. With a new mini consolidation in place, the key hurdle for the stock continues to be the 200-day moving average that stands around $600.

Google (NASDAQ:GOOG) also regained some of its strength after bouncing off its 200-day moving average on November 16. Yesterday the stock was rejected at its 50-day moving average, which is natural following a strong four-day rally. If the market does pull back a bit more, we will be watching GOOG closely for any signs of relative strength.

Price action in the precious metals has also been worth noting. Gold (SPDR Gold Trust (NYSEARCA:GLD)) and silver (iShares Silver Trust (NYSEARCA:SLV)) have been a bit weaker recently. On 11/28 we saw a pretty harsh gap down that never got filled in GLD, which usually leads to more downside and shouldn't be ignored. If you are trading GLD, honor your stops -- they are there for a reason.

The financials will be an interesting group to watch as fiscal cliff talks heat up. The sector has been the most sensitive to the contentious budget negotiations, and based on which direction they resolve current ranges could give traders market direction. Bank of America (NYSE:BAC) is still in the top end of its range and holding up best among the banks.

Overall right now traders are simply taking a little step back to survey the scene. The action over the next few days will be important in establishing how high we hold on this pullback.

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Scott Redler is long MGM, BAC. Short SPY, FB.
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