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Minyanville's T3 Morning Market Call: Can S&P Hold Black Friday Gap?


Green Mountain Coffee Roasters beats earnings expectations. Retailers such as American Eagle Outfitters, Aeropostale, and Guess will all report earnings later today.

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S&P futures are off about three handles this morning as Senate Majority Leader Harry Reid's remarks are still echoing all across the media. Yesterday was deemed a distribution day by IBD, the second down day since they put us back in a new fledgling rally. That is not exactly the type of action the bulls like to see. But if you put it in perspective, the oscillator was around +50 Friday and today it's around +25, so we were pretty overbought.

The S&P is also above the 25% Fibonacci retracement level of the recent bounce, and that level tends to get tested even in the most bullish environments. That being said, we are not in the most bullish of environments due to all of this fiscal cliff anxiety. When you get some choppy, narrow type action, it's best to be selective and book trades. For the SPY, the gap starts at $140.04 and gets filled at $139.57. The 38.2% Fibonacci retracement level is $138.75, which is pretty important in my opinion. The 200-day moving average currently sits at $138.52, making that a very significant area.

We have two more pieces of economic data today with new home sales for October, due at 10:00 a.m. ET, and the Federal Reserve's Beige Book of economic conditions, which will be released at 2:00 p.m. ET. The Beige Book is expected to show growth continuing at a modest clip with the labor market largely unchanged. Of particular interest to analysts will be the effect of Hurricane Sandy and the fiscal cliff uncertainty.

Every dog has its day. Green Mountain Coffee Roasters (NASDAQ:GMCR) has been hammered over the past year, dropping 75% since September 20, 2011 amid slowing growth and allegations of accounting irregularities. The stock has been mired in a lower range since gapping down huge on earnings in early May, but this morning is surging pre-market after topping Wall Street earnings expectations. GMCR is up more than 20% pre-market as the company reported better than expected K-cup sales. The report was by no means flawless, and the pre-market strength serves as a reminder that you have to keep context in mind for every stock prior to earnings.

We also have a host of retail earnings Wednesday to keep an eye on, including American Eagle Outfitters (NYSE:AEO), Aeropostale (NYSE:ARO), and Guess (NYSE:GES).

Also in the retail sector, Costco (NASDAQ:COST) is up 5% pre-market after declaring a $7 special dividend and reporting a 6% rise in same-store sales and 9% rise in total sales for November. Yesterday Las Vegas Sands (NYSE:LVS) announced a special dividend aimed at getting money out to shareholders before the higher tax rates of the fiscal cliff potentially take effect. Could Costco have the same motivation? Keep your eye out for that trend over the next month.

For short-term composure, it will be interesting to see if the SPY holds the gap from Black Friday. We are getting back into territory where it may make sense to nibble on some longs the way I did with Google (NASDAQ:GOOG) yesterday. Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) continue to act well. Continue to be a stock picker, identify relative strength, and keep it tight in this environment.

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Scott Redler is long GOOG, BAC, SLV, LEN, LULU, BAC. Short SPY.
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