HALFTIME REPORT: FAST MONEY’S CORRECTION PROTECTION PLAN
The Dow had fallen by triple digits around lunchtime Thursday, recording its biggest slump in more than a week.
The move was triggered by government data, which showed further weakness in the job market and a disappointing regional Fed survey which showed manufacturing conditions contracted in May for the eighth straight month.
Negative sentiment was also fuelled by word that S&P had threatened to strip Great Britain of its triple-A credit rating.
How should you protect your profits as the market pulls back?
Instant Insights from the Fast Money Traders
I’m seeing pattern changes in the market, muses Jeff Tomasulo of SMB Capital. In the past the market would trade up on negative news and now it’s trading down. I think it’s a signal that the market may be getting a little tired.
Also, the Vix is back above 30, reminds JJ Kinahan of ThinkOrSwim. (That signals traders expect increased volatility.)
And that's a normal relationship, adds Dan Fitzpatrick of StockMarketMentor.com. If the market is peaking out the Vix should be moving higher.
In the options market, I’m seeing appetite for risk reversal, adds Jared Levy of Peak6. Investors are selling a put and buying a call.
THE TREASURY MARKET
U.S. Treasury debt prices rose on Thursday as weaker stocks and worries that the global economy may not be recovering as quickly as originally thought boosted the safe-haven appeal of government debt.
If you think there’s a bubble in the Treasury market you can play it from the short-side by getting long the TBT, counsels Jeff Tomasulo.
HIDE OUT IN GOLD?
Gold rose for the third straight day to hit a new eight-week high above $942 per ounce on Thursday, buoyed by firmness in oil prices and the dollar's recent slide to its lowest level in nearly five months.
In the space, I’m looking at Yamana Gold, explains Dan Fitzpatrick. It just broke through $10, a key technical level. Patterns in this chart suggests to me the stock goes higher.
THE OBAMA TRADE: CREDIT CARD STOCKS
Credit card stocks were trading modestly higher on Thursday – even though President Obama is expected to sign a bill on Friday which would impose sharp new restrictions on them.
Taking full effect in February 2010, the bill would reign in interest rates, curb some fees; and do away with unreasonable penalties.
Analysts believe the bill will hurt the profits of major card issuers such as Citigroup , Bank of America, JPMorgan Chase and Capital One .
Remember these stocks have had a big pull back, already reminds Dan Fitzpatrick. A lot of the negative news is probably priced in. Personally, I love Capital One, he adds, because I think they just jack up the annual rates.
I’m seeing a lot of buyers of the 60-puts in Visa , reveals JJ Kinahan, which is interesting because the stock is trading at $65.
OIL, COMMODITIES PULLING BACK
Oil fell more than a dollar to below $61 a barrel on Thursday, after hitting a six-month high in the previous session on expectations of a rebound in the world economy.
Oil has nearly doubled since December, despite weak demand and high inventories. "While it may seem at odds with recent demand data and high levels of global inventories, we believe the economic outlook is improving and a second-half recovery, perhaps more vigorous than even we foresee, is on the cards," JP Morgan said in a note.
It seems to me oil trades in tandem with stocks. Crude plunged as the market plunged and when stocks settled into a range so did oil, muses JJ Kinahan.
What's the trade?
I would stay long oil, counsels Fast Money trader Joe Terranova. The commodity hasn’t broken below $60 with any reveal conviction. As long as the dollar remains under pressure I think oil stays high.
I’m looking for oil to go to $65 before it pulls back, adds Dan Fitzpatrick.
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CNBC.com with wires