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Minyanville's T3 Morning Market Call: Street Remains in Bounce Mode


Futures point to another higher open. Markets are still in bounce/relief mode as the move off the lower end of the range continues.

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There isn't too much new to say today as futures point to another higher open. Markets are still in bounce/relief mode as the move off the lower end of the range continues. Most stocks pulled off the highs in the last hour of trading yesterday, but are opening up somewhat close to yesterday's highs. The next few days can be very choppy as we still have important headlines to deal with, as well as buy pressure from third quarter mark-ups. At this point, it feels like this is a good spot to lose money as some traders will be leaving for the Jewish holidays, and volume will most likely be on the light side.

Holding higher in the indices will be somewhat constructive for the bulls as it will show some commitment buying at the upper end of the range. $SPX is up 8-12 handles with resistance at yesterday's high of 1195. Next level will be the 50-day moving average that the market failed at the 1207 area. The major technical zone to watch will be 1220-1230, the upper end of the range we've been navigating since early August.

Support in the $SPX lies at 1162-1165 and then 1135. At this stage most stocks seem to have run the course for their easy technical bounces, and now it's a matter of whether than can sustain any momentum. To this point within this range, we have not gotten that kind of tradeable momentum, and things can turn on a dime. Keep things light at these levels given everything going on this week.

If you have short on the brain like many people do, you should not be fighting this move, but instead looking for a more calculated short entry. It can be frustrating to see these low-volume, dead-air type bounces, but it is the reality of this market right now. That is why you don't short after a big flush -- because it doesn't take much buying to trigger a squeeze. You could be right, but it might not happen when you want it to.

The main trading catalysts/notable events for the market right now are:

Major Catalysts to Watch Coming Up

  • Europe
    • Several EFSF votes (Slovenia-Tues, Finland-Wed, Germany-Thurs);
    • Oct 1 meeting between Merkel/Sarkozy;
    • Oct 3-4 eurozone fin min meeting (there could be talk on leveraging the EFSF at this event);
    • Oct 6 ECB mtng (25-50bp rate cut, 6/12m tenders, covered bond buybacks expected);
    • Oct 6 BOE meeting (market increasingly anticipates more QE);
    • Oct 12 ECB 3-m US$ tender;
    • Oct 13 meeting to agree on release of Greek tranche;
    • Oct 14-15 G20 fin min mtng; 8) Oct 17-18 EU heads of state summit;
    • Nov 3-4 G20 heads of state summit.
  • China
    • The country's National Day holidays start on Sat, Oct 1 (investors are watching closely for any potential actions from the PBOC leading into this event). We get the Chinese PMIs for Sept Fri night (Sept 30).
  • United States
    • Ben Bernanke speaks Oct 4 (his first address since unveiling "Twist"), Nov 2 Fed meeting (there will be a press conference after), Nov 23 is deadline for "super committee" in congress to publish a report on a L-T deficit plan.
  • Holidays
    • Rosh Hashanah starts Wed night (and runs through Sept 30)
  • Q3 Earnings season
    • The bulk of earnings start during the week of Mon 10/17 although a few important names will come prior (Marriot (MAR) 10/5, Alcoa (AA) 10/11, Pepsico (PEP) 10/12, JPMorgan (JPM) 10/13). Sometimes companies will provide an initial forecast for their upcoming year earnings during the Q3 calls.

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