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Minyanville's T3 Morning Market Call: Can S&P Conquer October Highs?


Futures look to be breaking above the late October 2011 highs. The 1292 level is the October 27 high and it could get challenged today.

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US stock futures are up more than 1% Tuesday in the absence of a major catalyst. Foreign markets have posted strong gains already today with the Stoxx Europe 600 rising nearly 2% and China's Shanghai Composite up up nearly 3%. China reported that the December 2011 trade surplus widened by $2 billion to $16.5 billion.

Alcoa (AA) kicked off earnings season last night with a quarterly loss, but that was expected and revenues beat analyst estimates. Alcoa's Chairman and CEO said he expects aluminum demand to rise 7% in 2012. Alcoa is not the only commodity stock/ETF to get a boost this morning. Gold futures are up nearly 2% and crude oil futures are up about 1.5%. Copper prices are also up 2.6% as investors bet on stronger demand.

For now markets are shifting their eyes away from Europe, but investors will be watching debt auctions from Spain and Italy later in the week. Strong offerings could be the last piece of the puzzle for a rally, or a further rise in borrowing costs could stop this thin market in its tracks.

Eyes will also tonight be on the New Hampshire Republican primary where front-runner Mitt Romney is expected to cement his status as shoe-in for the nomination. The nomination of Romney, who worked on Wall Street, would certainly do nothing to spook the markets.

Technical Take

Futures look to be breaking above the late October 2011 highs. The 1292 level is the October 27 high and it could get challenged today. The real key will be whether we can close above.

Some say the catalyst is the China news, some say it's Fitch leaving France alone for 2012, some say its Alcoa demand outlook. Either way, as technical analysts we watch the price action, and we've been building a nice floor above the 200 day moving average. Today bulls will be watching to see if we can get some volume into this market.

A close above 1292 opens the door to the 1320-1340 level, which is the target that I've mentioned a few times since the Gap and Go back on December 20, 2011. It's been a somewhat slow methodical move, but this gives you time to be a stock-picker and pattern-watcher. Everyone complained when we went from 1100 to 1292 in less than a month. Now people complain it's too slow.

Take trades, hold and trail stocks, and use stop losses to protect gains. Most importantly, know your time frame and risk tolerance.

Tech has been a complicated spot lately. Market timing has been key to making money and staying safe.

Apple (AAPL) has had a great run since late December 2011 and now put a short-term reversal at highs. I did sell mine yesterday, but would like to get back involved. See how it handles the gap up open.

Netflix (NFLX) is the rock star of 2012, and gave a us a clear-cut entry on major volume last Wednesday around $75. I did sell mine yesterday as the gap was almost completely filled. Merrill downgraded it today, but it's back up with the market. It should settle down a bit. It's great for traders to have this vehicle back.

Google (GOOG) has had a tough week. Active traders were rewarded if they sold when we had a 30-point up move above $635 to almost $670. I did sell up there, and was looking to buy a dip. I didn't think it would be this harsh and lost a little testing these areas. Yesterday I went back long Google January calls on the close, to have premium paid as risk. (AMZN) still acts nasty. Overall the chart is bearish, but with earnings coming soon it's so hard to do anything. I would avoid it.

Microsoft (MSFT) had a nice run and needs some time.

Oil Service ETF (OIH) was profiled based on my call by Jim Cramer on Mad Money in mid-December 2011. I did get stopped out briefly around $108 and then re-entered in the $112 area. According to the strategy I sent him, tier two long is around here $119.50. I will see if we can get that entry. Next area of resistance will be $121-$122. Remember adding tier sizes for cash flow make sense. Only hold them if they close above momentum levels.

Banks have been acting better, especially the regionals.

JPMorgan (JPM) -- I've been holding this since before the New Year and trading around it. next resistance is the $36 area, then a big one at $37.50.

Wells Fargo (WFC) has been best in breed, I'm not involved.

Goldman Sachs (GS) has been reduced a few times but didn't really come in. I'm long some and looking to add if it can finally get and stay above $96.50.

We have seen some heavily shorted stocks make big moves. Let's keep our eyes on some others.

First Solar (FSLR) I'm in some. If volume comes in then $37.20-$37.40 is the pivot buy area.

Diamond Foods' (DMND) trigger long is $34-$34.40.

Green Mountain Coffee Roasters' (GMCR) trigger is $46.70-$47.30.

Put these on the radar but only go with them if heavy volume comes in.

Gold (GLD) and silver (SLV) have been acting better. I pointed out the divergence a few times last week.

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