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Market Sending Mixed Signals After Last Week's Turmoil

Scott Redler

Early this morning, S&P futures were down 6-7 handles but have rallied and are now up 4-6 handles as we head into the open. While last week we noted the most bearish action of the year so far, the indices continue to hold above key support levels. The right side of the range continues to build with pretty defined levels. Both the bulls and bears can point to why their case is valid. Last night we saw light PMI data from China's PMI, and then this morning we also got somewhat lackluster PMI data from Europe, but their markets are in the green. There is some talk that the age of austerity is ending, which could be contributing to this morning's bounce.

Micro support stands at on the S&P stands at 1548 with more important levels around 1536-1544. Resistance stands at 1565 then 1575. Yesterday the Homebuilders (XHB) were one sector that helped the did rally back after some softer data. Same sort of things happened in Transports, The Russell and Financials. All this helped markets hold in.

The Bio's and Pharma seem to be leading the way with many big moves in stocks like Celgene (CELG), Biogen (BIIB), Regeneron (REGN), and Amgen (AMGN) to name a few.

Tech continues to be mixed.

Netflix (NFLX), which has been a very strong stock since its last earnings release, delivered another blockbuster report and had some nice after hours trading once it cleared $197ish. That is the line that has to hold now as NFLX is up nearly 25% this morning.

LinkedIn (LNKD) also is best in breed and led the market along with NFLX after last earnings season. This could see some new life above its major pivot of $186-187.

Google (GOOG) had a wild ride yesterday but closed well. As long as it stays above $795ish it could continue to be a focus.

Yahoo! (YHOO) acts well after last quarter's earnings and is worth a look down here.

Intel (INTC) and Microsoft (MSFT) started to come on the radar over the last week, and despite some manic action both look like they could be destined for higher prices. Investors looking to park money in the market could be attracted to the stable balance sheets and solid dividend yield. They could use a rest before going again.

Apple (AAPL) earnings are out after the close. I will take a small call strategy just in case it gets halted, and then trade it after the report. As should be the case whenever you take an options strategy into earnings, I'm prepared that it could be $360 tomorrow and my options go worthless. That's why I'm defining my risk with options. Then I will trade it at that level if it goes the other way.

From JP Morgan:

"AAPL itself reports earnings Tues Apr 23 after the close and expectations are pretty subdued (and seem to be falling every hour). The St is modeling (as of Thurs 4/18): revs $42.485B, GMs 38.5%, OMs 29.6%, EPS 10.07, tax 26.19%, iPhone units ~35MM, iPad ~16-17MM, Mac ~4MM. For June, the St is modeling revs $38.907B, GMs 38.81%, OMs 29.31%, EPS 9.08 (nearly every preview says we expect AAPL to guide June below the St ). Many people increasingly think AAPL could announce an updated capital return strategy in conjunction w/earnings on Apr 23. In terms of anticipation, the 1) base case expectations on capital: a dividend yield of at least 3.25% w/$7.5-10B of annual buybacks; 2) upside case on capital: a dividend yield of ~4%+ and/or a large 1x special dividend (similar to what MSFT did years ago) coupled w/an ongoing yield of ~3.75%+. Buyback pace of $10B+ annually; 3) downside case on capital: a dividend yield of less than 3% and an unchanged buyback."

Metals are down a bit this morning as they've tried to bounce off last week's lows but remain broken. Gold (GLD) has some support at $137ish and has some micro resistance at $138.26.

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*DISCLOSURES: Scott J. Redler is long C, AAPL calls, AAPL. Short SPY