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Sellers Worried about Europe, or Playing Range Game?

Published: Tuesday, 7 Sep 2010 | 5:44 PM ET

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By: Lee Brodie
Producer

Stocks [.SPX Loading... () ] closed lower on Tuesday with concerns about the financial health of Europe once again driving losses.

A report out of Germany said that country's 10 biggest banks may need significantly more capital. Also Wall Street Journal report suggested the recent stress tests results out of Europe weren’t as rosy as they appeared.

However overseas woes may not be entirely to blame for the domestic sell-off; the move could be as much about technicals.

A large number of investors believe that the S&P is range bound. Considering last week was the best week in the past two months, as stocks approached the top of the range investors may have just locked in profits.

How should you position now?

(.SPX)

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Instant Insights with the Fast Money traders

In August the trading low was 1039 and the high was 1128, explains Steve Grasso on Friday's Fast Money. I don’t see anything that suggests the market is anything but range bound and until the S&P breaks above 1130, I'd buy the dips and sell the rips.

I’d trim some of my long positions, says Guy Adami on Monday's broadcast. Action in the Vix [VIX Loading... () ] gives me pause. It closed above 23.5, that's the 200-day moving average.

That's what I did on Tuesday; I took profits in names that had a good run such as McDonald's [MCD Loading... () ], says Karen Finerman.

I don’t agree that the market goes sharply lower, counters Tim Seymour. There's not a lot of data that should drag us down and key stocks are trading well. I'd position on the thesis that the market drifts higher into mid-September.

It seems to me that the big issue right now is the euro-banking problem and the flight to quality it triggers, says Anthony Scaramucci. Until we get a little rise in interest rates I don’t think the market acts much better.

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MARKET BUZZKILL: RESOURCE/INDUSTRIAL STOCKS

Resource and industrial stocks [XLI Loading... () ] led the way lower on Tuesday due to fears that last week’s euphoria may have been overblown.

How should you play the dip?

Copper [HGC1 Loading... () ] continues to trade well, muses Tim Seymour. I think there’s real industrial demand and not a lot of supply. I’d play the space long copper.

Hong Kong rallied sharply on Monday, says Steve Cortes and that suggests to me Asia’s market is strong enough to feel bullish about resources. I’m a buyer of Freeport [FCX Loading... () ] and BHP [BHP Loading... () ] on pullbacks.

I also like FCX, says Joe Terranova. And I’d also suggest long US Steel [X Loading... () ] if it breaks above $51, it’s 200-day.

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MARKET BUZZKILL: FINANCIALS

As we mentioned above, investors slammed banks across the world due to renewed fears that Europe’s bank crisis might not be contained after all.

What’s the trade?

Banks are trading as if they need to have another capital raise, says Guy Adami. I think the space is a little dicey but if you want to be in the space I’d look at long BofA [BAC Loading... () ] and US Bancorp [USB Loading... () ].

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STREET FIGHT: H-P STRIKES BACK AT HURD

Hewlett-Packard [HPQ Loading... () ] sued former Chief Executive Mark Hurd and asked a court to block him from joining Oracle saying his hiring by the rival technology firm puts HP's trade secrets "in peril."

Oracle [ORCL Loading... () ], the world's third-largest software maker, named Hurd co-president and director on Monday, a month after he resigned from HP over expense account irregularities related to a female contractor.

In a civil complaint filed in Superior Court in Santa Clara County on Tuesday, HP said: "In his new positions, Hurd will be in a situation in which he cannot perform his duties for Oracle without necessarily using and disclosing HP's trade secrets and confidential information to others."

HP said if Hurd is allowed to go to Oracle it would "give Oracle a strategic advantage as to where to allocate or not allocate resources and exploit.

And on a related note, after hours UBS downgraded HP as well as Intel [INTC Loading... () ] from 'Buy" to 'Neutral.'

What does ISI analyst Heather Bellini have to say about these developments?

* Watch the video and find out now.

FAST MONEY // Latest Rapid Recap

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Trader disclosure: On September 7th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (INTC), (MON), (POT); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Cortes owns (SFD), (BMO), (TD), (FCX), (BHP); Cortes owns the British Pound; Finerman and Finerman’s firm owns (BAC); Finerman owns (GOOG); Finerman’s firm owns (HPQ); Finerman’s firm owns (IBM); Finerman and Finerman’s firm owns (JPM); Finerman owns (ORCL); Finerman owns (POT) options; Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts

For Anthony Scaramucci
Scaramucci & SkyBridge Capital own (AAPL)
Scaramucci & SkyBridge Capital own (AMZN)
Scaramucci & SkyBridge Capital own (C)
Scaramucci & SkyBridge Capital own S&P 500
Scaramucci & SkyBridge Capital own Gold

For Heather Bellini
ISI does and seeks to do business with (ORCL) and has received non-investment banking compensation in the past 12 months

For Dennis Gartman
Funds managed by Gartman own Gold

For Ed Mills
***No Disclosures***

For Scott Nations
***No Disclosures***

CNBC.com and wires

Topics:Fast Money | The Negotiator: Guy Adami | Stock Picks

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