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Minyanville's T3 Morning Market Call: Selling Pressure Resumes Amid Europe Concerns


It's a brutal trading environment! That's what headlines create -- get used to it. This can go on for weeks or even months.

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The type of market action we've seen can get a lot of traders in trouble. Yesterday the market rallied 10-15 handles off the lows, squeezing uncommitted shorts out of their positions. That reversal also probably sucked in some small longs as it was a "mini reversal." It did lack power and punch, but it was worth a look for a day or so long.

Today we come in down 10-12 handles basically saying "no one wins." It's a brutal trading environment! That's what headlines create, get used to it. This can go on for weeks/months. You can either embrace it or complain about it. What I would do is bring down your size and bring down your opinions..

In 2010 we went 17% off the highs of the year. In 2011 we went 22% off the highs.

Why would we stop at only 5%ish off the highs with the European uncertainty and the magnitude of the first quarter gains? Meanwhile, the US economy is not exactly steamrolling along! A 7-9% correction is very feasible.

Stocks have big moves off the lows yesterday giving us new points of references to trade against, but also making it tough to keep it tight. I would use yesterday's low as a hard stop and hard pivot in anything you're trading both long and short. Yesterday below $135.76 was a nice short in the morning, and then a decent long above it, but you would have had to take quick day trades.

Take a look at August 3 of last year. The market had a mini reversal; then look at that engulfing bar on August 4. If you stopped yourself out at the 1234 low, you saved yourself a lot of pain. Just something to take note of.

S&P support from yesterday is 1347, and the SPY low is $134.92. If you are a bit long from yesterday, you could see if this area holds. The 100-day moving average on the S&P is 1345, with the March 6 low at 1340. 1340 is the level most folks have been talking about. That corresponds with SPY $134.63 then $134ish. The very big level is 1320-1322 on the S&P.

Look to some of the strong stocks from yesterday to see if they can hold yesterday's low. If not, the market will have trouble again today.

Last night I made a an appearance on CNBC Asia, where I talked about several market-related issues and served as guest host. Below are the links to each of those segments.

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Scott Redler is long AAPL DNKN SPY
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