Index futures are taking a pounding this morning after the Republican-led House rejected Speaker Boehner's "Plan B" proposal, bringing into play once again the extreme news-driven character of this current market environment. Anticipation of a Fiscal Cliff resolution has likely been the driver of this current rally, and as that becomes less certain, the market's reaction is back to the downside. This confirms our view that even if one seeks to play the market's uptrend by going long individual stocks one must do so in measured fashion.
As the futures come off, gold and silver find a bid this morning as their status as safe-haven plays comes back into focus. The precious metals, however, are in a severely compromised technical position after both the SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) both gapped down below their 200-day moving aveages. Even though they might bounce here in a safe-haven reaction after getting quite oversold yesterday, they still are nowhere near a buyable technical position. It will require some time for the GLD and SLV to rebuild and set-up again within their chart patterns if they are to have any hope of further upside going out into the future.
Michael Kors Holdings (KORS) flashed a pocket pivot yesterday after pulling back to its 50-day moving average. This helps to correct the v-shaped nature of the prior pocket pivot move of this past Tuesday. Today's pre-open action in the futures places any potential long idea in question, however, at the current time.
Apple (AAPL) still remains in play as a short-sale target, as it has not been able to rally with the market over the past month, and now has resistance at the 10-day moving average at around the 533-534 price level. We would look to get aggressive on the short side of AAPL if the stock decisively breaches the neckline in iits current head and shoulders formation, currently around the $500 price level.
Regardless of what side of the market one seeks to play, the environment is likely to remain volatile as the back-and-forth regarding the Fiscal Cliff begins to accelerate as we move into year-end. But we have considered that the weakness in precious metals as well as other commodities may be presaging a walk over the Fiscal Cliff, and so the anticipation of a Fiscal Cliff settlement that has helped to drive the current rally may begin to wane as it is this morning, based on the futures action.