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Morning Call: Markets Bouncing as Greece Referendum Now in Doubt

November 3rd, 2011

US stock futures again point to a higher open on Wall Street Thursday as hopes grow that Greece will cancel its public referendum and allow last week’s Euro rescue plan to go through. Amid widespread, vehement criticism, it now appears that Greece’s ruling party may force a cancellation of the event, which would remove a heavy weight from the market. Last night, after an emergency meeting in Cannes, German Chancellor Angela Merkel and French President Nicolas Sarkozy said that Greece’s latest round of aid would be suspended pending the referendum, and it is almost certain that if the referendum happens, and fails, than Greece’s days in the Euro zone would be over.


Greece is driving the action right now, but we are still working through a busy economic data week. Jobless claims are on tap at 8:30 ET, and then eyes will look to tomorrow’s jobs report. After the Fed decision yesterday, it is the ECB’s turn Thursday to decide whether to dip into its tool chest. The ECB is expected to deliver a rate cut on Thursday or in December as economic data in the region continues to deteriorate. Contagion fears have grown, with Italy;s 10-year bond yield at 6.28% in recent action. Yields above 6% bring fears that borrowing could be unsustainable.

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TECHNICAL TAKE

To use a football analogy, the Bulls got a new set of downs now after being pinned back deep in its own territory. Pressure on Greece looks more likely to lead to a cancellation of the referendum, and the market’s resilience yesterday perhaps hinted that this outcome was likely. While we keep an eye on the headlines in this environment, a pure technician lets the charts do the talking, and yesterday it didn’t appear that calamity was actually on the table.

Now its time to get back to the running and short passing game, rather than hoping for hail mary’s. Now that most shorts have been squeezed, it will take dip buyers to drive this market higher, and the rally is likely to be a bit slower. The G20 summit starts today and futures have already been all over the map. All eyes will be on the vote of confidence Friday alongside the jobs report here in the U.S. Some stocks still look good as earnings continue to roll in and quality stocks are still rewarding macro investors,. Traders are also seeing nice cash flow opportunities in sectors coming off the lows.

S&P resistance stands at yesterday’s high of 1242-1244. If the Bulls can close this market above 1250-1255 it would put them back in better scoring position. The next level is around 1274.

Support starts at 1226-1228, then the 1215-1219 area. If the market closes below this area I would consider that a bulls fumble (and we will be watching the same old Jets). Major support is the 1190 zone, which coincides with the 50day and the area that was very important a few weeks back.

Some stocks in the oil sector are starting to act better. They lagged a few months back, but charts are getting more constructive. Examples are EOG, APA, SLB and CLF, which all seem like they can be held for those looking to hold stocks.

The Optical group has a little life in the form of Finisar (NASDAQ:FNSR) and JDS Uniphase (NASDAQ:JDSU). JDSU had a nice earnings report and seems like it can keep going. A tier one macro position makes sense, above $12.75 can give this more momentum. I can see this $14-$16 at some point by year end. With FNSR I do see a bit of a reverse Head and Shoulders bottom here. A close above $21.50-$22 can get this stock going. It has room to $26-$28 this year.

Mastercard (NYSE:MA) and Visa (NYSE:V) are both acting very well as they have been macro hold recommendations a few times this year. No set up here, but they are in the game for higher prices certainly.

Las Vegas Sands (NYSE:LVS) still looks great. It has a very long-term channel that at one time will resolve for a move to highs of the year. Tier one long makes sense, and a close above $49.50-$50.50 could ignite that move.

There are some more set-ups to discuss, which we do every night in our Off the Charts newsletter. Also, you can follow me and other T3Live contributors live during the trading day in the T3Live Virtual Trading Floor.

Scott Redler
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.

*DISCLOSURES: Scott Redler is long (NYSE:SPY) and (NYSE:LVS).

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