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Morning Call: European Debt Woes Dampen Enthusiasm Over Improving US Data

January 4th, 2012

US stock futures point to a slightly lower open Wednesday after yesterday’s 1.5% gain to kick off 2012. Improving US economic data has been one catalyst for the rally over past few weeks, and that continued yesterday with a strong ISM survey. On the flip side, bond yields are back on the rise in Spain, and Germany saw lackluster demand at an auction of 10-year bunds. Non-Euro member Hungary also saw its currency fall to a historic low vs. the Euro after a passing a controversial law limiting the independence of its central bank and possibly damaging its access to bailout funds.


On the political front, Mitt Romney narrowly defeated the hard-charging Rick Santorum in the Iowa caucuses. The victory was unimpressive and it still feels like Republicans are looking for an excuse to vote for anyone but Romney. The results foreshadow what I think will be a long, hard Republican primary and a tough task to unseat Barack Obama, desptie his low approval rating.

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As mentioned, US data has boosted the market over the past several weeks, and now investors will have their eyes trained firmly on Friday’s first employment report of 2012. We could be seeing a slight de-coupling of the European and American economies, with the US looking more likely to avert another deep recession. While data has boosted hopes for a sustained bull market on the horizon, the European sovereign debt crisis continues to prevent stocks from gaining any sustained head of steam.

TECHNICAL TAKE

The SPY put in a very tight range yesterday that we can use as new points of reference.

Yesterday’s low was $127.43, which is your pivot to trade against. If the market gets pressured early on, it will be interesting to see how much of yesterday’s gap gets filled. Yesterday’s open was promising, but the action intraday was lackluster. Bulls would like to see at least half of yesterdays gap stay intact. $126.50-127 should be buyable if the bulls want to keep the short term momentum.

Above yesterday’s high of $128.38 the next big resistance is $129.42. I think you can use the same strategy across the sectors today. With a softer open, you can see where the relative strength or weakness will be today and they use yesterday’s low and high as action areas.

Example: If Amazon.com (NASDAQ:AMZN) trades through yesterday’s high of $179.47, I will trade for cash flow up to the next micro level of $183ish. See how Tech handles the miss by Acme Packet (NASDAQ:APKT) you are seeing some collateral weakness in Juniper Networks (NASDAQ:JNPR) ADTRAN (NASDAQ:ADTN), Tellabs (NASDAQ:TLAB) and BroadSoft (NASDAQ:BSFT).

Lululemon (NASDAQ:LULU) was upgraded by Goldman Sachs (NYSEArca:GS), so it will be worth watching. Sometimes you will see a big upgrade like this prove to be a short-term top for a hot stock like LULU, so be careful. We saw the GS downgrade of AMZN serve as its short-term bottom.

MGM Resorts (NYSEArca:MGM) got the move some were looking for in December and broke a longer term downtrend. It did get a positive mention today and has some more room to the $12-12.41 area. Las Vegas Sands (NYSEArca:LVS) is smack in the middle of the range with not much to do.

I did sell my Google (NASDAQ:GOOG) yesterday to book the two-week trade. I will be actively trading it all year, but macro investors should stay long and keep it until the $750+ target.

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.

This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by T3 LIVE or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.Visit the T3Live Homepage, Virtual Trading Floor, and Learn More About Us.

*DISCLOSURES: Scott Redler is long (NYSEArca:SPY), (NASDAQ:AAPL), (NASDAQ:AMZN), (NYSEArca:JPM), (NYSEArca:BAC)


NYSE:GLD, NYSE:MOO, NYSE:SPY


 

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