Morning Call: Can Market Build On Oversold Bounce? (SPY, GLD, IAU)
US stock futures point to a slightly lower open Wednesday but are paring losses as we edge closer to the open. Markets had a powerful day yesterday, finally getting the powerful oversold bounce that could put us into a new fledgling uptrend. When bearish sentiment reaches such extreme levels, and strong bounce is inevitable. That is what we saw yesterday, as dip buying then became short covering and made moves larger than usual. These types of days don’t always amount to powerful bull market moves, but none have been started without one.
Last time we got a decent bounce, on June 1st, it was all washed away with one huge bearish engulfing day. If that scenario tries to play out again, that is why traders use retracement rules to measure the validity of a move. If the Bulls have any manhood left, this market should hold 1280-1284 today and find some buyers that missed yesterday’s bullish action. A close below 1274-1277 will negate this set up. Besides, rallies that start in June don’t have high percentage of success like they have from August or September.
Digestion would be a good outcome for bulls, as it would allow more confident investors to get a more calculated entry for the potential resumption of the uptrend. It seems unlikely that the market will run away from us, and I expect to get some choppy type action that we saw last Summer. Greece did get through the no confidence vote, but now embattled Prime Minister George Papandreouwe will need to try to push through a round of deeply unpopular round of austerity measures.
Today the Fed meets and Bernanke’s language, as always, will be key. Then we have QE2 ending June 30th. We have the Debt ceiling vote in August. We have the monthly jobs report around that time as well, along with the usual suspects of economic numbers. There is now some more chatter about Portugal and Ireland. The bottom line is, yes, yesterday’s big move makes everyone feel a little bit better about things, but in reality we will face a murderer’s row of major issues.
We have been talking about this oversold bounce for almost a week, identifying relatively strong stocks that you could potentially look to buy when the market firmed up. Many of those stocks had powerful moves yesterday.
Apple Inc. (NASDAQ:AAPL) hadn’t shown much relative strength, but is a market stock that usually gets a big lift when the market bounces. See if AAPL can get back above its 200-day MA or if that area now serves as resistance. Long-term this is still one of the best stocks out there.
Amazon.com Inc. (NASDAQ:AMZN) was our number 1 candidate for a strong bounce, and it made strong move yesterday out of a beautiful descending channel. $192 is a spot it needs to hold from yesterday if this stock is going to keep the strong upside momentum going.
The best clouds in play right now, salesforce.com inc. (NYSE:CRM) and VMWare, Inc. (NYSE:VMW) had very nice moves, and should have more upside if the market follows-through.
The stronger of the Chinese Internets got a big lift yesterday as shorts were squeezed.
Baidu.com, Inc. (NASDAQ:BIDU) had a powerful move above the technical buy price yesterday of $121-122. This should now hold $124.50-125.50 to keep bullish complexion in place.
SINA Corporation (NASDAQ:SINA) was even more powerful. To maintain bullish composure, this should now hold $86.50-87.50.
I expect today to be a quiet day as traders wait for word from the Fed, and digestion would be healthy. Any deep retracement would be further evidence that this market now suffers from a crisis of confidence.
Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader. Scott Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Scott moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, he maintained his status as a top trader in the industry while working closely with all traders in the firm to dramatically increase performance. Scott has participated in more than 30 triathlons and one IronMan triathlon, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business and Bloomberg, and he has been quoted in the Wall Street Journal and Investor’s Business Daily among other publications. Scott produces much of the media and content available to subscribers and followers. T3LIVE.com is an online financial media network and education platform that provides active traders and investors with market analysis, real-time access to strategies, and in-depth training from real traders, real-time.
*DISCLOSURE: Scott Redler is long AAPL, SPY, BAC, JPM, CRM, AMZN.
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