US stock futures point to a lower open on Wall Street Monday as enthusiasm over a new European treaty faded. Risk appetite fell over the weekend following a strong Friday in which stocks surged almost 2% to erase the prior session's losses. The move was sparked by progress over a new Euro zone treaty that would include tighter fiscal regulations and harsher penalties for violating them. While the move is a step in the right direction, given the dire situation Europe now finds itself in, the market seems to be seeking greater immediate support for the financial markets.
The credit ratings agencies continue to be skeptical of changes being made to the system. Last week S&P put the EU and European banks on notice for a possible downgrade, and Moody's said last week that the Euro summit offered few new, game-changing measures. They continue to believe that the sovereign debt crisis is in a critical stage and are likely to downgrade many EU governments during Q1 2012. The ECB also indicated last week that it would be hesitant to buy more national bonds to keep interest rates down, a worrying sign for investors. Italian bond yields are back up near the 7% unsustainable level.
Gold futures came under heavy pressure this weekend and are off more than 2%. The ECB's decision not to pursue more bond purchases puts a damper on inflation expectations in the short-term, making people less enthusiastic about the yellow metal. Crude oil futures also saw heavy selling over the weekend, with the January stroke dropping 1.4% to $98.22.
TECHNICAL TAKE
There are mixed headlines this weekend as everyone debates what’s next for Europe after the Summit. Moody’s doesn’t seem impressed and seems to be pressuring the futures a bit. Everyone is all waiting to hear what S&P has to say, as they said they will make “quick decisions” about their ratings.
Either way, with all the choppy random swings, the markets still are on a perch, hanging higher right in front of important levels that will either keep this market trapped, or open it up for additional gains into year-end. The problem with a perch, is that if you fall off, there is a lot of downside room. This has traders measuring commitment each day so they don’t put their year in jeopardy.
S&P are Futures down 8-10 headlines this morning, so let’s look at some support levels from Friday. A negative-to-positive move would be positive for the market. Support 1 is 1238-1242 support, which is where we have been spending most of the morning. A quick move off this area would be the least painful. Bigger support is 1227-1232, and a break and close below this level would be very disappointing to the bulls.
To the upside, S&P resistance is 1262-1267, which has proven to be an impenetrable wall.
Tech has some constructive action, if Santa comes to town over the next two weeks this is the area I will look to.
Apple (AAPL) held its 200-day a few weeks back and then gave us a nice trade through the descending channel around $376. We have a small bull flag type set-up here. A trade through $396 is worth a look in the next day or so for this bounce to continue.
Google (GOOG) acted great on Friday. It's still one of the best stocks for 2012. Above $627-630 opens the door for a nice Santa move through year-end.
Amazon.com (AMZN) stock is broken for now, but for a trade we can see some cash flow above $194-195. I wouldn’t expect much here, though.
Baidu.com (BIDU) is still building a nice macro wedge despite most Chinese stocks all looking ugly. This one is the class of the group.$131- would be a nice level to buy for some cash flow as the next resistance stands at $135-137.
International Business Machines (IBM) is still holding the last buy area around $190 and is on it’s way to $200+ in my opinion.
Intel (INTC) is holding okay, but just a slow hold right now.
VMWare (VMW) acts okay with $98.50 area as next pivot to watch.
Sandisk (SNDK) acts tough and could get back on the move with a close above $51.
Novellus (NVLS) and KLA Tencor (KLAC) still act well during rallies.
Qualcomm (QCOM) has a decent set up as $55-55.40 is the next pivot area.
Gold (GLD) has a big macro wedge that’s formed. It’s been acting weak and seems like it will resolve to the downside (which is happening this morning). Support at $162 will be key. Under $162 the 200-day stands at $156, which is also near the early September pivot.
Banks are trying to hang tough. We had some nice trades in this group in the last week and half. See if they can continue to hold in.
Goldman Sachs (GS) will give us some clues. $99-99.40 is important support to see if dips continue to get bought.
JP Morgan Chase (JPM) needs to stay above $31.50-32.
Morgan Stanley (MS) needs to stay above $15.50 to avoid potential disaster.
We still have a lot of headlines to deal with. If we don’t hold and close well off the lows today, more frustration will set in. This weekend I was with a ton of big market players. Everyone has totally different opinions for 2012. Some think 1440-1480. Some think we can see below 800. Some think we will have another tight range. I will have my 2012 predictions in a week or so.
I will say the best way to handle this market is within your means. Know your timeframe and know what you can handle.
*DISCLOSURES: Scott J. Redler is long SPY OIH AAPL GOOG LULU
