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Minyanville's T3 Morning Market Call: Narrow Your Focus in Dizzying Tape


At this point it's best to pare down expectations and limit your risk.

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US stock futures are down slightly this morning after we saw another bearish reversal yesterday afternoon. The market initially ticked higher following the Fed announcement, which was highlighted by the unveiling of an additional $45 billion in monthly Treasury purchases. That $45 billion is tacked on the already $40 billion in monthly mortgage-backed securities purchases, and at this rate the Fed will add nearly a trillion dollars to its balance sheet in 2013. Chairman Ben Bernanke spoke extensively about the Fed's employment mandate, saying he will be very accommodative until unemployment falls to around 6.5%.

However, stocks could not hold those initial gains and sold off progressively harder during Bernanke's protracted press conference. The Dow (INDEXDJX:.DJI) and Nasdaq (INDEXNASDAQ:.IXIC) plunged all the way into negative territory at the close while the S&P (INDEXSP:.INX) was only able to hold its gap by a thread. That gap will likely be filled this morning and traders are left dizzy once again. We have seen mini-reversals in both directions several times over the past few weeks, so at this point it's best to just pare down expectations and limit your risk.

As we get closer to the end of the year, patience and discipline become increasingly important. Start your evaluation process for 2012 and formalize your plans for improving in 2013. Traders who treat their forays into the market like a small business venture are the most likely to succeed.

The fiscal cliff continues to weigh anxiously on the minds of investors. Markets have adjusted to the constant barrage of fiscal cliff headlines, but as the deadline approaches skittishness is only likely to increase. Right now the market is simply stuck in the mud, unable to get momentum to the upside or downside, and that's largely due to the fiscal cliff.

On the corporate front, brick-and-mortar electronics retailer Best Buy (NYSE:BBY) is up 13% pre-market on reports that founder Richard Shulze may make a buyout offer. It is not the first time Shulze has made noise about taking the company private after its share price has been pummeled over the last few years. Online retailers like Amazon (NASDAQ:AMZN) are eating Best Buy's lunch, and the evidence is in the price action of each stock.

We have been highlighting Google (NASDAQ:GOOG) as a stock with a constructive pattern that could get momentum if the market firms up. The market isn't cooperating this morning, but GOOG is breaking out anyway. The catalyst for the bullish price action this morning could be news that Apple (NASDAQ:AAPL) has added the Google Maps app back to its App Store. After widespread complaints about the accuracy of Apple maps, the app will likely get a flood of downloads this week.

Gold (NYSE:GLD), like stocks, initially spiked following the Fed announcement, but faded into the close and is opening lower this morning. GLD is set to open below its 100-day moving average after holding above it since August, and the short term-pivot to watch will be the low from December 5 of $163.20. The next support level is $162.30 from November 2, and then the 200-day moving average comes into play around $161.35.

One stock we will be watching in the Momentum Trader Mentoring Room today for a potential short is Priceline (NASDAQ:PCLN). The stock is forming a bear flag after breaking hard below its 200-day MA on Monday. We will also be watching Kohl's (NYSE:KSS) for a potential short. (NYSE:CRM) was a great pattern highlighted in our Off the Charts newsletter, and we will continue to watch this stock because it is in-play right now. McDonald's (NYSE:MCD) is also forming a bit of a bull flag and I will be watching it for a break of the upper pivot.

Two others to watch for momentum trading are Netflix (NASDAQ:NFLX) and Facebook (NASDAQ:FB). Although the broad market tape is lethargic, you are seeing some beaten down, forgotten stocks like Molycorp (NYSE:MCP), Green Mountain Coffee Roasters (NASDAQ:GMCR), Research In Motion (NASDAQ:RIMM) and NFLX, just to name a few, come back into play, so put those types of heavily shorted stocks on your radar for Santa Claus/January Effect type plays.

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