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Morning Call: Futures Shrug Off Italian PM Monti’s Resignation

December 10th, 2012

Italy seems to be the source of most headlines as Italian PM Mario Monti confirmed he would be resigning from his post. It’s not the biggest surprise, but the media will beat up this story and put Europe back in view for a bit. The next European leaders’ summit is 12/13-12/14, so look out for that.

 

Today futures are bit softer but nothing extreme—we’re down 2-4 handles as markets continue to take some of these headlines in stride. There are some micro resistance points at 1423 and then 1435.  It does seem like this lethargic targeted trade will be supported into year end. There is some micro support at 1408-1410 for now with a bigger level at 1397.

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On the “fiscal cliff” side, the President and Boehner had talks, but nothing substantial or new came from it. The market seems less affected by the daily headlines on this subject as most think something will be done in the last hour, or early next year with the “boomerang” thesis.

The Fed decision comes on 12/12 and will be the last decision of the year.  This is an expanded-format meeting with a Bernanke press conference and new forecasts.  The expectations are for the FOMC to raise the QE3 monthly purchase pace (now $40B per month) to account for the expiring Operation Twist (worth $45B per month).  Most people assume QE3 will be raised to ensure purchases stay at the current $85B/month rate for at least the start of 2013.

Overall it’s been a very calculated trade since the November 16th low of 1343.   The first move had a lot of participation up to the 1420ish level. Since then it’s been a very targeted trade with many divergences for traders to deal with. Dip buyers have supported the market in the 1400 area during the past two weeks and on Friday the S&P finally closed above the 50day (but not with much authority).

Tech is a very mixed bag.

Google (NASDAQ:GOOG) had a decent move but turned down on Friday in front of the 50-day—this chart is also a bit damaged and I would watch the $680 area as important support.

Amazon (NASDAQ:AMZN) was probably the strongest high beta. Doing some work above $250 after a major move from $220 is constructive. The spot to use as a short-term pivot to trade against is $255.

Priceline (NASDAQ:PCLN) is choppy and closed on the lows Friday. Recent support is $650-$654.

eBay (NASDAQ:EBAY) is still holding up but not very choppy. Important upper support is $51.

Yahoo! (NASDAQ:YHOO) is still acting well since the $16.60 breakout and then it held $18.50 well. Trim and trail.

Oracle (NASDAQ:ORCL) and Cisco (NASDAQ:CSCO) lately are the strongest mega cap tech names. Intel (NASDAQ:INTC) is trying to get some traction but is not so compelling.

Facebook (NASDAQ:FB) gave traders/investors a nice move from $22.50-$24.25 targeted trade up to $28.88. Now it’s absorbed that move well.  A move and close above $28-28.88 could open the door for additional moves back to $32ish.

LinkedIn (NASDAQ:LNKD) cleared $108 and looks okay for those fans of the stock.
Transports (NYSE:IYT) are in a very tight descending channel. It’s been a long one—typically a channel with that length that gets resolved and turns into an interesting trade. The longer it stays above $90 the higher the probability for an upside break through $96ish, but it’s slow.Banks gave us a nice move last week. Bank of America (NASDAQ:BAC) was the focus on the Price Point Sheet andOff the Charts newsletters last week and then JP Morgan (NYSE:JPM) played some catch up on Friday. Trim and trail this group. Goldman did say U.S banks should be a constructive place to be for 2013.

The Industrials ETF (NYSEArca:XLI) also looks good as it’s getting back to highs.

The Homebuilders ETF (NYSEArca:XHB) is bit lethargic now, which is confusing.

Metals are not very interesting but they did hold lower support. Important support is $162-164 for Gold (NYSEArca:GLD) as we move forward.

A lot of market participants I talk to are not doing much, as we could go higher but the trade isn’t compelling. Will be get a Santa Claus rally or will the fiscal cliff situation present a headwind?

If we can work through the fiscal cliff issues and economic data continues to improve, there could be some great trading in early 2013. Take our Free Online Trading Course to make sure you are ready to tackle the action!

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 Invest.

Scott is currently the Chief Strategic Officer of T3 Live and is a Registered Associated Person of T3 Trading Group, LLC.

*DISCLOSURES: Scott J. Redler is long BAC, JPM, YHOO, INTC. Short SPY.


NYSE:GLD, NYSE:XHB, NYSE:XLI


 

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