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The T3 Morning Market Call: Futures Take Dip After Short-Term Sell Signals; Facebook Soars

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Facebook beat on revenue and EPS, but perhaps most importantly, saw mobile revenue grow significantly.

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Yesterday, if you are a member of the Virtual Trading Floor(R), you heard us harping on a few of the short-term faulty signals that were appearing in the market. The S&P (INDEXSP:.INX), Russell 2000 (INDEXRUSSELL:RUT) and homebuilders broke down out of upper level ascending channels, and today world markets are following through to the downside.

European markets are giving back almost everything they gained the day before. China finished down about 0.6% and Nikkei (INDEXNIKKEI:NI225) closed on its lows down 1.14% as the yen strengthened. S&P futures were down 10-12 handles earlier in the morning, but have bounced back a bit and are currently down six to seven handles.

The action area to watch in the S&P was the previous high of 1687, which broke yesterday. Now we have some support at 1671 then a big area at 1662 that could serve as bigger support if we see it.

Now I will go over some technical support and levels to watch in some key sectors.

Russell 2000 ETF (NYSEARCA:IWM) got hit hard yesterday as it broke the ascending channel to put in a wide red candle. The $104.25 level was the adjustment area. Big support is sitting at $101.94 from the July 11 gap.

The Homebuilders ETF (NYSEARCA:XHB) has been lagging the market for the past month. It continued to show some relative weakness yesterday with 2.11% of losses. The ETF also broke the mid-level range that was built in the last four to five sessions. It's currently holding the 100-day but yesterday's close pointed to potential lower prices. There are lots of broken charts in this group: Lennar (NYSE:LEN), Toll Brothers (NYSE:TOL), KB Home (NYSE:KBH), PulteGroup (NYSE:PHM). There is not much support until $29ish.

The Transports ETF (NYSEARCA:IYT) also flashed a sell signal as it broke the bull flag to the downside on Tuesday. It got some follow-through selling yesterday as it shed another 1.15% to close well below the 8-day MA. The 21-day comes in play at $114.30ish, which could be worth a look to cover or nibble long if it holds. The 50-day is down at $113.20.

The Financials ETF (NYSEARCA:XLF) remains a stronger group as it touched its 8-day moving average yesterday. The 21-day at $20.23 could be a good spot to look to nibble back if you sold some strength.

Earnings continue to roll in, and continue to be a very mixed bag. Most of the high-profile reports last night were positive.

Facebook (NASDAQ:FB) was the headliner last night, and it appears the company may have turned a corner. The social networking company beat on revenue and EPS, but perhaps most importantly, saw mobile revenue grow significantly. The stock is up over 23% this morning! Mobile has long been an area of disappointment for FB, which gave many portfolio managers pause about putting money to work long-term in the stock. Patient investors are getting rewarded. I have a call spread that caps me out today, which is a bit frustrating. It will be good to have this back in the game. Some resistance comes in around $32-32.50 from early January. Let it settle a bit.

Apple (NASDAQ:AAPL) responded pretty well to earnings yesterday. Now it needs to build above $435ish for the complexion to change. I believe it's a good candidate to go from negative to positive and then perhaps get additional momentum above $444.59.

Baidu (NASDAQ:BIDU) beat estimates and guided up, and the stock is up more than 15% this morning. BIDU has been very strong over the past three weeks, and it's now set to open above $131. I wouldn't chase it here, but it goes back on the "go-to list."

Qualcomm (NASDAQ:QCOM) wasn't as bad as some feared, and as a result it's up a bit this morning. Let's see if a pattern develops above the gap.

Google (NASDAQ:GOOG) stalled at $914ish. It needs to hold $897 short-term to keep this pattern intact, or it will need more time to base.

Amazon (NASDAQ:AMZN) earnings are after the close today. The stock has been a rock star but it pulled a bit off the highs.

Netflix (NASDAQ:NFLX) has been grinding lower since earnings. The $240.20 level is a pivot with bigger support at $231ish (a spot to potentially buy some back, in my opinion).

The precious metals ran into resistance a few days back and are opening down near areas that needs to hold if there is hope for more upside.

Gold (NYSEARCA:GLD) should hold $126-126.50 if it wants to keep some active traders interested. Silver (NYSEARCA:SLV) needs to hold around $19.20-19.30.

At this point the meat of earnings season is almost over and the market does feel a bit tired (or maybe that's just me). I would do a little less, pare down risk, and hit some beaches and mountains to recharge the batteries a bit for what could be a very active fall.



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Scott Redler is long FB call spread, AAPL. Short SPY.
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