HALFTIME REPORT: MARKET ON THE MARCH
Both the Dow and S&Pwere trading in the green around lunchtime Friday, although gains were modest. Investors snapped up shares of multinational companies, including McDonald's , on hopes that a weaker dollar would underpin profitability. Also energy companies such as Chevron climbed higher on bets that overseas demand would support energy prices.
How should you be positioned ahead of the 3-day holiday week-end?
Instant Insights from the Fast Money Traders
I think the uptrend is still in tact, counsels Bill Strazzulo of Bell Curve. But I’d go into the long week-end flat. If we can come out of it above 890 in the S&P I’d get back in.
Price action in the S&P has been ‘whippy’, adds Brian Stutland of Stutland Equities. In other words, it’s moving in and around the 900 mark. Typically when the market goes into the summer months we see intra-day volatility but not broad volatility. You have to be careful not to buy the highs and sell the lows.
SEARS LEADS CONSUMER NAMES HIGHER
Investors are keeping a close eye on Sears, which made a big move to the upside on Friday. Is the move powered by fundamentals or is it a short squeeze?
Options action suggests to me there’s a short squeeze going on, says Brian Stutland. I’d play it with buying calls and selling puts.
I think the squeeze is over, counters Dan Fitzpatrick of StockMarketMentor.com. It seems to me the pros have faded this move.
And if you’re looking for a longer term play, I’d look at some if the low to mid-level retailers, adds Zach Karabell of RiverTwice. They should profit from the weak consumer.
OBAMA TRADE: CREDIT CARDS WEIGH ON BANKS
Discover Financial Services, American Express and Capital One were all trading lower mid-day after word hit the Street that these and other credit card companies may face further rating downgrades as new legislation to protect credit card borrowers crimps their earnings.
"The banks most impacted by these changes are likely the 'monoline' card issuers such as Discover and American Express. As well, we note that more than half of Capital One's managed revenues are from its U.S. card business," CreditSights analysts David Hendler and Baylor Lancaster said in a report.
What's the trade?
I think the trade is to short them all, counsel Dan Fitzpatrick. I think there’s a lot of litigation risk. Or just avoid the sector all together because of the uncertainty that stems from government involvement.
It seems to me the new law is good for the rest of the economy in the long-term, muses Brian Stutland. Borrowers will have a much better sense of what the real interest rate is when they put things on their credit cards.
GOLD SOARS ABOVE $960
Gold climbed to a fresh two-month high on Friday, powering above $960 an ounce for the first time since late March, as the dollar's slide against a basket of currencies boosted buying of the metal as a currency hedge.
Silver prices posted the biggest percentage gains among precious metals, however, climbing to a nine-month peak of $14.83 as investors turned to the metal as a cheaper alternative to gold.
I think gold is the most irrational investment known to humankind, says Zach Karabell. People buy it when they don’t know what else to do. It seems investors don’t know where the market is going so they’re piling into gold and I’m not a fan of that.
In the space I’m keeping an eye on Freeport McMoRan, adds Dan Fitzpatrick. It’s consolidating above the 200-day moving average. Because of where it's sitting technically, patterns suggest to me it goes into the low $70’s, however wait for your entry point.
The dollar fell on Friday to its lowest level in five months against a basket of currencies. The slide largely stems from fears that S&P could do to the United States what it did to Great Britain; threaten to strip the nation of its triple-A credit rating.
Analysts tell CNBC that fears about a downgrade are premature, though not entirely unwarranted.
Don’t forget that the market felt the ratings agencies missed the boat entirely with derivatives and now they're closely listening to their call on sovereign debt, muses Zach Karabell. Personally, I don’t live in a world where S&P determines global capital flows.
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Trader disclosure: On May 22nd, 2009, 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), (BBT), (EEM), (FLR), (TTM), (INFY); Seymour is Short (FCX); Terranova Owns (ABI), (JOYG), (XBI), (TER); Terranova Owns (DIS) Call Spreads; Terranova Owns Oil Futures; Terranova Owns Nat Gas Futures; Terranova Owns (DIS) Calls; Terranova Owns June Gold Futures; Grasso Owns (AMZN), (RIMM), (V); Grasso's Clients Own (AMZN), (PG), (X), (MA), (VA), (ALL), (AMP), (JPM), (WFC), (SUN), (PBR), (POT), (MOS), (MSFT), (IBM), (XLE); Najarian Owns (ISIS), (BCSI); Najarian Owns (APC) Call Spread; Najarian Owns (AMD) Calls; Najarian Owns (BX) Calls; Najarian Owns (INTC) Calls; Najarian Owns (PALM) Call Spread; Najarian Owns (MOS) Call Spread; Najarian Owns (XHB) Call Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (XLU) Call Spread
CNBC.com with wires