Watch for a Retest of the Lows

 | Oct 22, 2012 | 10:37 AM EDT
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We have a routine Monday-morning bounce to start the week. The flippers hit it hard but support held and inched back up. A bounce in Apple (AAPL) is helping the cause. Breadth is slightly positive at 2650 to 2300 and coal, steel, gold and chips are leading while biotech and retail lag.

What we have to watch for is a retest of the lows. If the early lows are breached, that is going to trigger another round of sell stops and bring in aggressive shorters. When the market is in a downtrend, the lower lows spark the pressure, so keep a close watch on that level. Right now, it's 1429 on the S&P 500.

I'm not very trusting of the upside and any buys I make are with very short time frames. The coals and metals are mostly leading, but I don't see much momentum I want to embrace.

One setup I find appealing is Chinese contract manufacturer Nam Tai Electronics (NTE), which I've discussed before. It has been holding between $10 and $11 since the beginning of September and should attract some momentum buyers if it can break the $11 resistance level with decent volume. Other than that, I have very little on my radar screens and I will stay selective.

At the time of publication, Rev Shark was long AAPL and NTE, although positions may change at any time. 

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