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Minyanville's T3 Morning Market Call: What to Expect in December


Stocks to watch include Apple, Facebook, and Google.

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US stock futures have a positive tone this morning despite more pessimistic rhetoric over the weekend about the fiscal cliff. As we talked about on Friday, it feels like the market has started to develop a thicker skin about the budget negotiations. Last week the market digested well, consolidating gains we have seen since the November 16 reversal.

Today is the first trading day of December, so we'll have several pieces of monthly economic data on tap this morning. Manufacturing surveys in Europe and China were better than expected, sparking a rally in world markets, while we wait for the ISM manufacturing data at 10 a.m. ET. Manufacturing PMI will also be released at 9 a.m. ET.

Since that "outside day" reversal, there have also been very tradeable moves in individual stocks. The question is: What kind of upside do we have left this year? Right now, the S&P is up 12+% and Nasdaq is 15% for the year. Markets have been showing great commitment to this bounce since it started two weeks back.

Apple (NASDAQ:AAPL) will continue to be a focus for traders, and the stock is set to open up almost 1% this morning. AAPL has shown relative strength since reversing on November 16, and last week digested those recent gains well. The next major obstacle for AAPL is the 200-day moving average at around $600.

Facebook (NASDAQ:FB) has been one of the strongest stocks in the market over the past three weeks following the expiration of an 800 million share IPO lock-up period. Many expected FB to sell off when the large new wave of supply hit the market, but instead the stock squeezed shorts and has been in a steep uptrend since. The stock filled an earnings gap from late July and may need some rest after an impressive run.

Google (NASDAQ:GOOG) has also come back to life a bit, bouncing well off its 200-day moving average. The stock had been heavy since earnings, which were leaked prematurely during the trading day on October 18 and fell short of expectations. The next resistance level to watch on GOOG is the 50-day moving average around $705.

The recent micro floor on the S&P is 1409-1410, while bigger support is 1397-1400. With a trade and close above 1420, I think we quickly rally to 1425-1428. A bigger resistance level, which I think attainable by year's end, is 1435-1445. There seem to be two camps out there right now: One is saying we will stall around 1435ish and are building a right shoulder of a much bigger head and shoulders pattern, and the other is saying new highs of 1474 in the S&P by the first quarter of 2013 with an objective of 1575 by summer.

At this point, we will measure composure along the way. A portfolio approach has been working and I will stick with that mindset until I see complexion change. Right now the action is very constructive.

With the fiscal cliff bringing uncertainty to the market, we should see a volatile month with plenty of opportunity (and risk) for traders.

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Scott Redler is long AAPL, QCOM, FB, MGM, BAC, OIH. Short SPY.
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