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Minyanville's T3 Morning Market Call: Will Fed Deliver With QE3?

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If you are a short- or intermediate-term trader, today is not a day to have a lot of risk on.

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Futures are a bit soft this morning as the dollar weakened to a seven month low vs. the yen. All eyes will be on Big Ben to see what comes out today. Will we see QE3, and what will it look like? I think most in the market think it will be a "sell the news" event after a rally in anticipation of further easing (although they thought the same for Apple (AAPL) yesterday).

Anyway, we've come a long way since the June 4 low, and even longer from the October 4 low, so selling some stocks and putting on some hedges makes some sense up here. The trend is still intact, though, and I certainly wouldn't declare game over for the bulls.

The S&P (^GSPC) is still flagging nicely above the 1422-1426 breakout level, and as long as that continues, the market will have shorts trapped and pent-up bullish momentum. The 8/21 moving averages are playing some catch, which is healthy. The 8-day is now 1423 and the 21-day is 1415. Resistance now stands at 1439. Above this and then we enter my end of the year target zone of 1450-1470.

Speaking of Apple, the stock is opening higher today following yesterday's unveiling of the iPhone 5. We did a breakdown yesterday of the new features in the iPhone 5, and came away impressed with the new handset. While there weren't any leading innovations, Apple updated the phone with all of the newest, fastest, and smartest technology available, while also improving the look and feel of the handset. Investors are clearly impressed enough as well, believing that the new iPhone will smash previous sales records as we head into the holiday season.

Traders will also be watching Facebook (FB) closely this morning to see if it can get any follow-through to yesterday's gap up. Facebook, since going public, has had a tendency to give back gains soon after any bounces, and it will need to prove itself. Yesterday the gap held in well and could become a pro gap. After a period of sustained weakness, could this be the start of a turnaround for Facebook's stock? Mark Zuckerberg, at least, is starting to "get it."

On any Fed Day, it's important to watch the precious metals, which can be volatile around rate announcements. The metals have been on a big run higher over the last few weeks, breaking their descending wedge pattern to the upside. Gold (GLD) and silver (SLV) have hardly seen a meaningful pullback, and if the Fed does indeed lay the groundwork for QE3 today, it's likely they will continue higher. If the Fed fails to meet those expectations, it's possible we could get a significant sell-off in GLD and SLV.

Overall, if you are a short- or intermediate-term trader, today is not a day when you should have a lot of risk on. Trading around Fed announcements can be hazardous, with fake-out moves and harsh reversals. After a nice run in the market over the last month, don't be afraid to lock in gains and wait for a less headline driven set-up to trade.




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Scott Redler is long AAPL. Short SPY.
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