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Minyanville's T3 Morning Market Call: Market Could Remain Stuck in Neutral Until Q2


Yesterday's failure to break above 2013 highs could simply be a sign that this market needs more time.

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S&P (INDEXSP:.INX) futures are up about two handles this morning as foreign markets were quiet overnight. European markets and the Japanese Nikkei (INDEXNIKKEI:NI225) are near flat while China is down 1.25%. With the Jewish holiday of Passover beginning last night, Easter approaching, Spring Break happening, and the end of a blockbuster first quarter beckoning, we could be poised for a quiet market the rest of the week.

Yesterday's failure to break above 2013 highs so far has not brought out follow-on selling. Rather, it could simply be a sign that this market needs more time. Right now you could use S&P 1538-1545 as important support to trade against. Sometimes markets need more time to develop a bigger base to spring off of into new highs, or sometimes that base has some cracks and gives way to a decline. We will be watching closely to see which scenario plays out.

At this point longs and shorts have been working if you use your relative strength/weakness tactics. I will say, it's been hard to add to longs as they are going higher the same way it's been hard to press shorts. So far for the quarter S&P is up 8.8% and the Nasdaq (INDEXNASDAQ:.IXIC) is up 7.3%. This is a good time to evaluate whether you participated in the trend or fought it. It's not a time to chase performance and "make up for lost opportunities." We have three quarters to go; there will always enough time to make some adjustments in your process.

Apple (NASDAQ:AAPL) remains a focus for traders right now as it has broken out of its multi-month downtrend and is trying to hold above it. Digestion above the $460 area is healthy, and the stock is up pre-market. It tried to extend yesterday morning but couldn't shrug off the broader market weakness intraday.

Goldman Sachs (NYSE:GS) continues to show weakness, which is one of the factors causing traders to be a bit cautious at upper levels in the market. However, GS is up $2 this morning and any follow-through to the upside could be a huge boost to the market. The banks overall have a been a good barometer of market composure.

Netflix (NASDAQ:NFLX) has been teetering on the edge of upper level support, but this morning got positive comments from Pacific Crest that are contributing to some pre-market strength. Watch to see if NFLX can hold those gains this morning.

Gold (NYSE:GLD) remains an erratic trade, and seems to have evolved into a pure fear trade for the market. With the futures opening higher yesterday morning, GLD opened lower but found footing as the market sold off intraday. GLD is opening back down near its 21-day moving average this morning, so it will be interesting to see if GLD can make another higher low.

Our focus is mainly on price action and technical analysis, but we do also like to take a look at macro economic trends. What ended up playing out in Cyprus is very interesting, and I think it signals a new chapter of the European debt crisis. The ECB took a much harder line with Cyprus, to the point that the final deal was more of a "bail in" than a "bail out." By "bail in," I mean all creditors will take a haircut before state money gets used. In this case, you saw the extreme step of a tax on deposits. The ECB says it is not going to tolerate casino economies any longer, which is easy to say when the subject country is a minnow like Cyprus. It will be interesting to see if the ECB starts to take a different approach with a country like Ireland.

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Scott Redler is long F, MGM, BAC, AAPL, S, DDD call spread. Short SPY, HPQ.
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