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Minyanville's T3 Daily Recap: Market Rebounds From Gap Down, but Light Volume Is a Red Flag


Pay attention to the price action over the next few days in stocks like Facebook, Zynga, Groupon, and LinkedIn.

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Major US indices were mixed Monday, with the Nasdaq and S&P posting gains and the Dow slumping to a loss. If nothing else, it was an interesting day in the market. The status quo pro-bailout party won the elections in Greece, which was supposed to be good for stocks, but markets retreated from overnight highs and actually opened lower this morning. This surprising result was largely the result of Spanish bond yields rising above the key 7% level, with any yield past that seen as unsustainable for raising new debt.

Tech and momentum stocks fared the best today, with even some laggard stocks getting a bounce. Social media stocks stood out in particular, as Phillips Hogan pointed out in his post before the close. A handful of positive news stories in these stocks triggered what looks short covering, and it will be key to pay attention to the price action over the next few days in stocks like Facebook (FB), Zynga (ZNGA), Groupon (GRPN), and LinkedIn (LNKD). Our firm highlighted Facebook as a RedDog reversal set-up back on June 6, and the stock has gained almost 25% since then.

While it was encouraging for bulls to see stocks bounce back from disappointing pre-market action, all does not feel well with this market. Volume was extremely light, and we could get more choppy, frothy action as we enter the meat of summer. As mentioned, bond yields in Europe continue to rise to unsustainable levels, and the result in Greece is seen as nothing more than a temporary solution before an inevitable euro exit.

The difficult part of this market is timing trades in either direction due to the explosive headlines and potential for central bank and government intervention. Remain in sniper mode for the time being, perhaps testing some swing trades in smaller size in only the best leading stocks. To identify those stocks, tune into the Virtual Trading Floor each day and listen to our live radios.

The Wednesday Fed meeting could move the markets, and, as usual, will almost certainly move the commodity markets. We could get very choppy untradable action at least until then. Gold (GLD) was weak early but bounced back, showing some indecision over what investors expect from the Fed. Some expect more movement toward QE3 with economic data deteriorating, while others think the central bank will hold off and it will be another "sell the news" event for GLD.

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Scott Redler is long AAPL, GLD, LVS, SBUX. Short SPY.
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