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Can Rally Build Momentum?

Scott Redler

Futures are up a bit this morning as we head into Fed Day. The FOMC is expected to increase the volume of monthly asset purchases from $45 billion to $85 billion to offset the expiration of Operation Twist. We live in interesting times as we wait for QE4." I hope by the time my son understands what QE" means we are not waiting on QE10." Anyway markets continue to grind higher as we grapple with fiscal cliff headlines, news that North Korea is testing rockets, and mass killings in Syria.

Paying attention to the price action and key levels has proved more prudent than watching the headlines. If we continue to drift higher into year-end do not try to fight the tape, but also don't fall asleep behind the wheel. Markets have proved that a portfolio approach has been the right approach since the November 16th outside bullish reversal. Continue to trade around positions with a hedge.

It would be healthy to the see the S&P consolidate above the 50-day moving average. There isn't a lot of momentum due to the unusual wildcards in the market right now, but I think the market can stair-step higher as long as we hold above 1415-1420 area. This should create a new floor.

Apple (AAPL) is trying to bounce off lower levels after putting in a lower high, but there hasn't been any real momentum in the trade. I always watch AAPL very closely and will continue to trade it with a micro strategy this week. The first point of reference will be yesterday's high, and then Friday's high could pose as some short-term resistance.

The banks remain interesting to me, and perhaps are evidence that investors are hopeful over the fiscal cliff. Stocks in the financial sector had been especially sensitive to the fiscal cliff headlines, but are now holding up well. Bank of America (BAC) put in a mini-breakout failure yesterday, but it was nothing potent that should concern swing traders. The action today will likely determine how long I ride this trade. JP Morgan (JPM) also acts well and has some room to highs into year-end. Goldman Sachs (GS) has become one of the laggards in the group, but it could play some catch-up like we saw yesterday.

Salesforce.com (CRM) had a textbook breakout yesterday after putting in a very clean bull flag below 52-week highs. The CRM set-up was listed on Off the Charts several times over the last few weeks and it rewarded patient traders. We will be watching to see what it leads to today.

Be sure to sign up for the free webinar: How to Enhance Swing Trade Returns with Options on Wednesday at 6pm ET featuring T3Live's Scott Redler and OptionMonster's Jon Najarian (who is also a frequent guest on CNBC's 'Mad Money') Scott will analyze recent technical action in equities while Jon will provide perspective on how you could have maneuvered the same inflection points using options.

*DISCLOSURES: Scott Redler is long AAPL, BAC, JPM, GS, INTC, MGM, FB LULU. Short SPY.