Morning Call: Futures Weighed Down by Spanish Debt Woes, Trade the Price Levels (SPY, AAPL, FB, LNKD)
US stock futures point to a lower open on Wall St Wednesday, weighed down by further debt woes in Europe. Futures had staged a slight bounce from overnight lows, but are now heading back down to those levels. The principal focus has shifted to Spain, which may not have much more time before it needs a bailout as panic is starting to set in regarding the nation’s banking system. Trading in European markets was chaotic this morning as Spain’s borrowing costs hit nearly their highest levels since the inception of the Euro.
Yields on the 10-year Spanish government bond hit 6.69%, nearing the high of 6.779% from November 25, 2011. When levels reached 7% in Greece and Italy, it prompted bailouts of those countries. With Spain’s borrowing costs rising, it appears the government will have to bailout Bankia ES, one of the nation’s largest banks.
The more you read about what’s really going on in Europe, the more concerning it becomes. This slow, “amortize problems” over time approach can only work if you have an eternally unified front and unbreakable to will to stay the course. That is far from what see out of Europe right now. When Hollande got voted in and Greece said “no thank you” to new austerity measures, the true stripes started to be revealed. The Euro zone is simply populated with too many complicated nations with different cultures/histories. By trying to solve problems slowly over time, you prolong what could be a disaster looming that could have been avoided if problems were faced when they revealed themselves (what happens when principal comes due not just interest- hmmmm!?) Below is a pretty good read with Ruchir Shmara’s take. Lots of concepts discussed here in my notes! http://www.cnbc.com/id/47608180
Since I’m a Technical strategist, I will not trade based on the headlines, but, as I always do, based on my levels and tactics. My rules keep me safe, because I can only control my approach, and not the problems of the world.
Yesterday the market started strong and fizzled out, but began to regain some footing into the close. The McClellan Oscillator that I typically point out went from -85 a week ago to +10ish. This was a bit of caution flag, that we won’t get help from oversold conditions anymore. We actually need some good news or real buying. So this made being long a bit more tricky! We had a move from 1291 to as high as 1334. Although bigger resistance stands at 1343-1345, a 40 handle move is a prudent spot to take off some longs and try to stick with some a bit longer. Only be in the best of the best names long right now.
The first pivot to watch in the (NYSEARCA:SPY) is $132.75, which is the start of yesterday’s gap. Trade against this level. The gap fills at $132.10, giving any shorts caught a way to cover, negating any pent up bullish momentum (no more upside pain trade). SPY $131.34-131.78 is bigger support. This is a spot that, if we see today, needs to be defended. A close below this area and the recent lows of $129.55-129.99 become a magnet.
When you see a Sea of Red on the open, you need to see if anything goes green. Can any sectors lead us off the lows? Look to strong stocks from yesterday to see if you can get a gap fill for cash flow. If the gap doesn’t get filled in the first 60 minutes. Typically that remains the direction of the day.
Retail and homebuilders have been the strongest groups. Stocks that held around the 100-day moving average act best when we bounce. Banks are trying to hold onto lower pivots with some other weak groups.
Apple (NASDAQ:AAPL) has been the strongest high beta stock. It needs to stay above $565ish to make it easy for short term guys. My swing stop is going to be $557. I will look to see if there is relative strength for a negative to positive cash flow move. The market (and I) would also love to see a clean break above $574-576.50!
Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) look more like shorts than longs.
Facebook (NASDAQ:FB) new pivot is $28.65. It’s below that right now although off pre-market lows. Maybe we can see some type of cash flow bounce today. I will watch this. The $26-28 range was my action area target from last week.
LinkedIn (NASDAQ:LNKD) was upgraded today. This is NOT Facebook! It’s time to separate these stocks from each other. It needs to continue to hold $95-96 to breed some confidence.
Gold (NYSEARCA:GLD) was first to fail yesterday, and it seems like this is telling us “Deflation” is on the horizon, but I’m not an economist. The major level to trade against is $148.27-148.75. If you are a Gold Bug, you probably broke some rules staying long over the last six months, but I would follow this one and hedge/sell if we close below that level.
Wynn (NASDAQ:WYNN) has been crushed. Goldman Sachs (NYSE:GS) upgraded them today, and it’s at a spot that it could bounce from it. See if Las Vegas Sands (LVS) can go positive as well.
Research in Motion (NASDAQ:RIMM) is near $10. It hasn’t been a macro long for a long time. Today is probably not the day to sell it if you violated all rules and still own this. It could go lower, but around $8.50 it will interest me as an accumulation.
As a market participant, you need to know what’s going on in the world, but most important is your strategy and time frame. Sometimes a thesis is good, but make sure you can stay with it until the market confirms it. It does take risk and dedication to be involved with scenarios longer term.
Scott Redler is the Chief Strategic Officer of T3 Live. He develops all tradingstrategiesfor 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 tradingequities for more than 10 years and has more recently received widespread recognition from the financialcommunity 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 tradersin the firm. As a manager at Sperling Enterprises, he maintained his status as a top trader in the industry while working closely with all tradersin 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 Businessand Bloomberg, and he has been quoted in the Wall StreetJournaland Investor’s BusinessDaily 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 NASDAQ:AAPL, NYSE:LVS. Short NYSEARCA:QQQ.