Tricky Spot for Trend Traders

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We are in a tricky environment as the morning futures take us back to almost where we failed from yesterday afternoon. Markets pushed through the S&P 1450 level, and then faded the rest of the day, spinning around traders who tried to be tactical. Some guys probably flipped and went out short as we had many push through failures. This is not a great environment for intermediate-trend traders. Today it seems like most will want to do the opposite and fade this up open rather than buy, which could make for more choppy trading.

The wedge type process is meant to tire out all the longs and all the shorts that are looking for follow-through. By the time the pattern is built most are fed up and then it resolves setting indices back in motion for better movement. If you put it in perspective, we are still above 1430 and only around 3% off the highs of what has been a very impressive year so far (S&P up 15%, Nasdaq up 18%). This is only the third week since we topped out on September 14th, so digestion makes sense.

I am a believer that the highs of the year are not in, and that we will see S&P 1500+ in the first quarter of 2013, but recently it's been hard to re-position for that potential move. The art of sitting on your hands is important for long-term trading success, so don't be afraid to sit in cash.

Apple (AAPL) has been a drag on the market over the last two days, and it broke below its recent pivot yesterday. The stock is set for a slightly higher open this morning, but expect to see further weakness down to the 50-day moving average over the next few sessions.

Google (GOOG) has separated itself from AAPL at this stage and could open at new all-time highs this morning. Watch for a break above the five-day flag, but manage your risk after a very long 200+ point run in this stock over the last few months.

Facebook's (FB) erratic early public life continues. Two weeks ago it looked like the stock was poised to turn a corner, surging from lows of $17.55 to $23.37. However, a bearish weekend Barron's cover story, which gave FB a price target of $15, triggered a big gap down. Yesterday, FB filled that gap intraday but couldn't hold it. Let's see if it can close in the gap.

Speaking of Barron's, the influential publication put Goldman Sachs (GS) on the cover this past weekend, taking a bullish stance on the once-proud bank. GS was up nearly 5% yesterday at one point but closed well off the highs. A gain of more than 2% is positive for the stock and sector, even though the weak close left a bit of a bearish taste in traders' mouths.

*DISCLOSURES: Scott Redler has no positions

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