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Bulls About To Make Another Run At 1113?

Published: Thursday, 29 Jul 2010 | 5:50 PM ET

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By: Lee Brodie
Producer

Once again, action in the S&P [.SPX Loading... () ] has generated chatter that bulls are about to make another run at the 200-day with momentum back on their side.

After weakness for most of Thursday's session the market turned up in the late afternoon and stocks pared the worst of their losses.

(.SPX)

Loading... (%)

This turn may be particularly significant because the S&P has challenged and failed around 1113 a couple of times already. Typically that doesn't happen more than 3 times.

Can the bulls finally drive the market above this level of extreme resistance? Or is the market about to make a triple top?

Instant Insights with the Fast Money Traders

The book ends in the S&P are now the 50-day which is 1081 and the 200-day which is 1113, says Steve Grasso. If you must play this market I’d sell at 1090 or lower and I’d be a buyer at 1113 or higher. But this is a complicated and unpredictable market. If you don't have to be in it, I’d stay clear.

I expect that the market will show its true colors soon enough, says Guy Adami. All the signs suggest to me that the move will be violent. It will either rip to the upside or it’s going to crater. Personally, I think we go to the downside.

The drop on Thursday erased almost 3 days of gains, muses Brian Kelly. The market grinds higher but then boom – it drops. I've sold stocks and put out shorts positions but I’m getting small. Right now the way to trade is to be small and nimble.

I’m watching market bellwether Goldman [GS Loading... () ] which blew through $153, says Jon Najarian. I take that as a bullish sign.

I’m using this market to find opportunity and I think I’ve found it in Covidien [COV Loading... () ], says Karen Finerman.

SLIDESHOW Tomorrow's Trades: Capital Ideas Into Year's End

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MARKET BUZZKILL: CONSUMER STAPLES

Looking at the fundamentals. consumer staples [XLP Loading... () ] generated big headwinds for the market on Thursday after Kellogg [K Loading... () ] and Colgate [CL Loading... () ] reported disappointing earnings. The results called into question stocks that many investors thought were safe havens.

What must you know?

I thought Kellogg’s quarter was lousy, says Guy Adami. I think it’s a ‘tell’ on the consumer.

There could be ripple for Procter [PG Loading... () ], Campbell [CPB Loading... () ] and Heinz [HNZ Loading... () ], says Steve Grasso. My clients are wondering if they’re still defensive trades in the wake of Kellogg and Colgate results. If you’re looking to play defense, rather than consumer staples I’d rather play tobacco. I’m long Altria [MO Loading... () ].

I think this is a case where the bar is set fairly higher and even small things cause stocks to overreact, says Karen Finerman. In high multiple stocks the down-move tends to be overdone.

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ANALYZE THIS: JAPANESE-STYLE DEFLATION?

St. Louis Fed president James Bullard came out with some bold statements on Thursday; among the commentary he said the current Fed policy could lead to Japanese-style deflation and warned of the danger of "exceptionally low" pledge in the Fed statement

What must you know?

Find out from Miller Tabak’s Peter Boockvar. Watch the video now!

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TOPPING THE TAPE: OIL

Energy stocks [XLE Loading... () ] closed higher on Thursday with crude [CLC1 Loading... () ] snapping a 2-day losing streak. However Exxon [XOM Loading... () ] failed to participate in the rally despite posting strong quarterly results.

What should you make of the move?

If you’re an investor Exxon makes sense at these levels but if you’re a trader it’s dead money, says Guy Adami. I think the best place in the space is nat gas and I'd play it long Apache [APA Loading... () ].

I’d play it with UNG [UNG Loading... () ], says Brian Kelly.

Exxon and other large cap names could soon outperform, speculates Steve Grasso. In the wake of the BP spill there’s so much litigation risk in the space I expect money to rotate out of midcaps and into blue chips that can better weather a storm.

I’m bullish Valero [VLO Loading... () ] and Holly Corp [HOC Loading... () ], adds Jon Najarian.

FAST MONEY // Latest Rapid Recap

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Trader disclosure: On July 29, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kelly owns (BP) puts; Jon Najarian owns (GLD) puts; Jon Najarian owns (AAPL) call spreads; Jon Najarian owns (MSFT) and short calls; Jon Najarian owns (COP) and short calls; Jon Najarian owns (RRC) and short calls; Jon Najarian owns (MSFT) and short calls; Jon Najarian owns (SYMC) and short calls; Jon Najarian owns (RIMM) and short calls; Jon Najarian owns (IACI) and short calls; Jon Najarian owns (LVS) and short calls; Jon Najarian owns (MGM) and short calls; Jon Najarian owns (XOM) and short calls; Jon Najarian owns (MOS) and short calls; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman owns (BAC); Finerman’s firm owns (BAC); Finerman owns (BP); Finerman’s firm owns (BP); Finerman owns (C); Finerman owns (CVS); Finerman’s firm owns (CVS); Finerman owns (FLS); Finerman’s firm owns (FLS); Finerman’s firm owns (GLW); Finerman owns (JPM); Finerman’s firm owns (JPM); Finerman’s firm owns (KFT); Finerman’s firm owns (PLCE); Finerman’s firm owns (RIMM); Finerman’s firm owns (SKS); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST); Scaramucci owns (APL), (PFE), (MO), (BUD), (KFT), (RAI)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (ESV)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (LEN)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (KEG)

For Anthony Scaramucci
SkyBridge Capital owns (APL)
SkyBridge Capital owns (PFE)
SkyBridge Capital owns (MO)
SkyBridge Capital owns (BUD)
SkyBridge Capital owns (KFT)
SkyBridge Capital owns (RAI)

For Brian Kelly
Accounts managed by Kanundrum Capital own (BAK)
Accounts managed by Kanundrum Capital own (VIV)
Accounts managed by Kanundrum Capital own (ORI)
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own Swiss Francs
Accounts managed by Kanundrum Capital are short (GLD)
Accounts managed by Kanundrum Capital are short (XME)
Accounts managed by Kanundrum Capital are short (SLX)
Accounts managed by Kanundrum Capital are short (RKH)
Accounts managed by Kanundrum Capital are short (XLK)

For Peter Boockvar
Boockvar owns Euros

For Brian Stutland
Stutland's firm makes a market in VIX Futures

For Gene Munster
Piper Jaffray makes a market in (AAPL), (AMZN), (GOOG), (IACI), (YHOO)

For Joseph LaVorgna
***No Disclosures***

CNBC.com with wires

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