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The T3 Morning Market Call: World Markets, Dollar Bounce Back

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Homebuilders have been showing extreme relative weakness. Tech remains stock-specific.

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After yesterday's decline, world markets are bouncing back a bit this morning as the dollar rallies against yen. Yesterday, the dollar posted its biggest decline against the yen since May 2010 after the BoJ stood pat following a two-day policy meeting. The Nikkei (INDEXNIKKEI:NI225) had a volatile session but closed well off its lows near the flat line. Chinese markets were closed for a holiday.

S&P (INDEXSP:.INX) futures are up nine handles after we experienced another distribution day yesterday that prompted IBD to put its "Big Picture" in "Market Correction." Typically when IBD does this, it means the complexion of the market now dictates a higher level of caution and selectivity. Recently, though, each time they've changed to this stance, we've rallied from those levels instead of getting downside follow-through. Will this time be different?

We will look at levels for clues. The longer we stay above yesterday's lows in the S&P of 1626ish, the higher the probability that this is just an upper consolidation phase. If we fall below this level then we could see a re-test of the 50-day MA at 1610ish. A close below that and the 100-day could come into play at 1576. If we stay above 1626 for a few sessions and show commitment to last Thursdays bounce, the next objective for the market to get some momentum back would be a close above 1645-1655.

Either way, it's summertime trading, a time to be much more selective and perhaps enjoy some fresh air. I will be very tactical until I see more commitment to a direction. I am in the camp that the highs of the year are not in, but that doesn't mean we can't get some correct action on a shorter time frame.

Today we will go over names that are providing good short-term tradable action. 3D printers showed relative strength yesterday.

ExOne (NASDAQ:XONE) is the best of breed in this group. It showed impressive strength yesterday and made new all-time highs at $53.36. XONE held its 21-day during the last pull back with the accelerated uptrend since April 22 staying intact. Some digestion after a new high would be constructive for higher prices moving forward.

3D Systems (NYSE:DDD) held up well yesterday as it found some support at the 21-day MA at $45.44. The longer it holds above $44.50 prior breakout level, the higher probability we could see a move through the current resistance at $47.44.

Stratasys (NASDAQ:SSYS) saw a small inside day after seeing some decent gains on Monday. Use yesterday's low of $81 as your new micro support, below that we have the 50-day at $80.

On the flip side, homebuilders (NYSEARCA:XHB) have been showing extreme relative weakness and the sector contains some very broken charts.

Lennar Corporation (NYSE:LEN) fell below its intermediate support of $36.60 yesterday after a 1.85% decline. It has shown some relative weakness recently after the push-through failure at the 200-day on Friday. If it doesn't reclaim the $36.60 key level quickly, we could see more lower prices in the coming sessions. If the market continues to be under pressure, this could be a good short candidate. Be aware that LEN got an upgrade this morning, so the potential short continuation could take more time now.

Toll Brothers (NYSE:TOL) shed 2.4% yesterday as the bears have been in control since May 28. The stock broke below its 200-day on June 3 and was never able to reclaim this key moving average. A break below yesterday's low of $31.72 could lead to a quick move down to prior pivot low of $29.87, which could be the first stop to the downside.

DR Horton (NYSE:DHI) has also been trading in a downtrend since May 15. It has lost the support of all key moving averages except for the 200-day, which the stock was trying to hold for the last few days. A break below yesterday's low of $22.17 could breach this last key moving average and lead to lower prices. This could be another short candidate if you're looking for short ideas.

PulteGroup (NYSE:PHM) is also hanging by a thread at the $19.95 level after breaching all key moving averages. There is a short-term downtrend in place since May 15. A break below $19.95 could lead to a move down to the 200-day at around $18.62.

The tech sector remains very stock-specific.

Apple Inc. (NASDAQ:AAPL) got some pressure from its 8- and 21-day MA at $442ish yesterday and finished the day down a marginal 0.3%. The stock is trying to hold Friday's lows of $432.77. Use this as the new point of reference to trade around as a break below this could take it back to the key $419 level.

Facebook Inc. (NASDAQ:FB) is trying to hold above Monday's gap at $24 but couldn't find upside momentum as it's still trading below the key moving averages. A break below $24 could lead to a quick gap fill to $23.40.

Intel Corporation (NASDAQ:INTC) gapped down into Monday's low of $24.64 where it bounced and filled the gap to the upside, showing some relative strength. However, it couldn't take out Monday's high, making yesterday an inside day. Support 1 is $24.64 and below that we have a bigger support at $24.22.

Banks weakened yesterday after reports that Citigroup Inc. (NYSE:C) could be vulnerable to up to a $7 billion trading loss if the dollar continues to rally against the yen and euro.

Citigroup finished down 3.8%, and the news could have altered its status as a 2013 sector leader.

Goldman Sachs Group Inc (NYSE:GS) gapped down then tried to fill the gap early, but failed and faded lower the rest of the session to post a 2.5% loss. Complexion could be changing a bit in the banks after a period of leadership, which could be bad news for the market. The next support level is sitting at the 21-day at $159.51.



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