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Minyanville's T3 Morning Market Call: Eyes Shift to Apple Earnings, Fed Meeting


Apple has a lot to live up to with its next report.

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US stock futures point to a higher open Tuesday, looking to bounce back from yesterday's break of the mini-uptrend line started on April 10. Worries over the European sovereign debt crisis are ramping back up as borrowing costs in Spain rise. Also there is uncertainty in France, where incumbent President Nicolas Sarkozy faces an uphill climb to retain his position.

Earnings season rumbles on with one of the most anticipated reports of the season, Apple (AAPL). A blockbuster report with enormous iPhone 4S sales ignited a monster rally for Apple in Q1, and the company now has a lot to live up to with this next report. The stock has traded off sharply in the pre-market after initially pointing higher. Who knows what that means, but it will certainly raise some eyebrows.

The Fed's FOMC will also begin a two-day meeting today after a wave of weaker economic data in the US. Most strategists believe, though, that data has not deteriorated enough to warrant any serious talk of QE3.

Netflix (NFLX) is down 15% in the pre-market after another disappointing earnings report. The stock had climbed back over the $100 level in 2012 but is now set to open around the $85 level.

This is why you trade the markets. Netflix gave us a screaming buy signal on January 4 around $76-$77! It was our focus for about four to six weeks. Then it gave a big "Red Dog Reversal" sell signal on February 7 around $130.59. There were also trades for cash flow in the middle, and now it's back at $86.51. Everyone must learn how to enter and exit the markets. Today, as I have no position there, I will look to see if we get a buyable strategy for cash flow. If not, I'm sure we will hear some takeover talk in the next few days to create small opportunities back at these lower levels.

Technical Take

For the right shoulder to continue to build with no concerns for the bears, I would think a lower high gets put in place and we don't get a close above S&P 1376-1382. This spot should be an area to re-short if you don't re-short even sooner. I think there is too much damage for the double bottom to stick, but I will let the market give me more conviction to lean that way.

A break and close below SPX 1355-1360 will set the market in motion for a move down to the 1320-1340 zone.

Most leading stocks have been hanging on to their 50-day by a thread. This has been a prudent action area for traders to cover shorts and look for bounces. I enter today neutral, but will look to "re-short" more SPY in the $137.60-$138.20 zone.

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Scott Redler is long JPM, ZNGA, DNKN. Short SPY.
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