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Minyanville's T3 Morning Market Call: Market Kicks Off 2012 With Sharp Gains


The catalyst for the rally appears to be better-than-expected manufacturing data out of China.

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US stock futures are up sharply to kick off 2012, with the S&P e-minis up 1.5% overnight. The catalyst for the rally appears to be better-than-expected manufacturing data out of China, whose main index is up more than 2% today. Employment data in Germany also showed that joblessness has fallen this month in Europe's bedrock country, providing the impetus for the rally in European markets.
The US Dollar Index fell more than 0.5% overnight and commodities are higher, with gold back near $1,600 an ounce and oil back over the $100 level after rising 2.7%. The US economic calendar will kick off today with the ISM at 10 a.m. and then the FOMC minutes.
Eyes will shift tonight to the Iowa caucuses where Republicans will take the first step toward choosing a challenger to Barack Obama in the 2012 presidential election. The race right now is seen as close between Ron Paul, Mitt Romney and a surging Rick Santorum. It's unlikely, however, that any result would effect the markets. If the radical Ron Paul, who wants to abolish the Federal Reserve, were to continue his rise and start to threaten for the nomination, the markets could recoil a bit.
Technical Take
The December 20, 2011 Gap and Go set the table with a new "confirmed rally." The last two weeks created a nice, tight wedge-type pattern that needed some new flows to ignite a first-quarter move to the 1320-1340 zone. From the looks of the overseas markets and the big open, all the pieces of the puzzle have come into place. There have been some stocks showing relative strength that remain on my go-to list, and some have changed as the market rotates and stocks go through cycles.

The manufacturing data out of China and Europe were all stronger than expected. Combine this with a crowded euro short and no catastrophes over the long New Year's weekend and this has stocks on the move.
A 60-minute close this morning above 1275-1277 will then open the door to contend with the October 20 high of 1292. A daily close above this level will then put the first-quarter 2012 target of 1320-1340 into potential play. (This year, I will talk about each quarter differently and give strategies based on the macro technical setups!)
Apple (AAPL) was one of my favorite stocks during the last two weeks of December 2011 as it acted very well and should close the gap from last quarter's earnings disappointment. If the gap gets filled up to $415, this will nullify the Island Top. Earnings are not for a few weeks. It might take a great report for new all-time highs.
Google (GOOG) is my favorite stock of 2012 triggered above my $630-$636 buy zone and is now trading above $650. Take trades along the way, but the weekly/monthly charts tell me we could see north of $750 this year. (AMZN) has been technically broken since it missed its earnings last quarter. There have been lots of nice sell setups after that point. Last Thursday though, as Goldman Sachs downgraded it, the stock put in a massive reversal bar (*day to take notice) which can relieve some pressure and $185-$190 could be retested before it decides the next direction. (BIDU) -- the Chinese stocks were all under pressure the last few months of the year. This one has a lower pivot that should be watched. A oversold bounce can take this back to $122-$125, however.
Sina (SINA) has also has been very weak, but is still holding the reversal low from December 16. WIth the market in rally mode, though, it could bounce a bit as well.
For those of you that covered gold and silver on Thursday like we mentioned, you did the right thing. Pigs get slaughtered. Both metals capitulated and were vastly oversold. We will measure the move in the first few weeks in order to figure out where you can lay them out again.
Gold (GLD) has a huge area of resistance to look closely at, which is around $158-159.50.

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Scott Redler is long SPY AAPL GOOG JPM BAC.
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