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Investors are pulling out clumps of hair trying to figure out which direction stocks are headed. The S&P 500[.SPX
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] ended modestly higher after an improved outlook from Texas Instruments[TXN
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] lifted technology shares, but curiously stocks did not take-off on the news that 10 big banks have received the okay to repay TARP funds.
It seems the major catalyst of the summer is oil [US@CL.1
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]. The energy sector has helped to hold up an otherwise sluggish stock market that has meandered about for the better part of the month.
How should you be positioned?
Strategy Session with the Fast Money Traders
It seems to me that oil wants to break above $70 and from a technical perspective that’s very important, muses Joe Terranova. It seems to me the trade is either long or flat – but I wouldn’t short oil right now.
$70 oil will probably lead to higher prices at the pump, but I’m not terribly worried, bristles Jeff Macke. As far as I can see – the economy is not recovering. People can’t afford gas now so it’s no surprise that they won’t be able to afford it later this summer. Honestly, I don’t see the fundamentals in place to ignite a demand driven recovery.
If you’re trading the space, I’d be careful, counsels Guy Adami. Oil services stocks such as Baker Hughes [BHI
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] and Schlumberger[SLB
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] seem to be ahead of themselves. The current valuations don't make sense to me.
Commodities provided leadership in the market Tuesday, counters Pete Najarian. It seems to me investors are buying into the idea that the pullbacks aren't there -- as a result the moeny on the sidelines could go into the market.
Although commodities provided leadership today - I don't think the commodities market can lead the equities market higher from where we are now, counters Guy Adami. Especially since financials look like they're starting to fizzle out.
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FINANCIALS SLIGHTLY HIGHER ON TARP NEWS
On Tuesday the Treasury said 10 of the nation's biggest banks were approved to pay back a combined $68 billion of taxpayer money pumped into them last year to combat the credit crisis.
Treasury refused to name the banks but some quickly stepped forward, including Morgan Stanley[MS
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] and JPMorgan[JPM
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] to say they were among those cleared to return money.
U.S. Bancorp[USB
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], American Express[AXP
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], Bank of New York Mellon[BK
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] and BB&T Corp[BBT
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] also said they had received approval to repay funds.
A source familiar with the matter said Northern Trust[NTRS
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], State Street[STT
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], Capital One Financial Corp[COF
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] and Goldman Sachs Group Inc[GS
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] had also received a green light.
It was no secret that these banks were going to pay back TARP, reminds CNBC’s Steve Liesman. And that’s why the stock market didn’t pop on the news. I think investors want to know when some other banks such as Wells Fargo[WFC
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], Bank of America[BAC
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] or Citigroup[C
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] will come out of TARP.
How should you trade the financials?
I see options investors buying ‘at the money straddles’ in some big banks, explains Pete Najarian. That suggests to me big investors suspect there could be a next leg to the rally.
I want to know how the government is picking which banks can pay back TARP money and which can’t, bristles Jeff Macke. Maybe I’m a conspiracy theorist but that seems fishy.
In the financial space I think the hot plays are the asset managers such as Blackstone[BX
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] and Jefferies [JEF
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], adds Joe Terranova.
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TOPPING THE TAPE: T-I LEADS TECH
Technology shares led the Nasdaq [.NCOMP
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] higher on Tuesday after Texas Instruments[TXN
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] raised its outlook and earnings targets late Monday.
"Any time you get a company discussing guidance and increasing guidance, its going to be taken as out-sized positive news," explains Dan Greenhaus, an analyst at Miller Tabak & Co.
I think the trade is a short position in TXN maybe above $21.50, says Guy Adami. It seems the stock is now ahead of itself.
Or go long Intel[INTC
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], adds Pete Najarian. I think they’re positioned well and there’s more upside.
Also the options action in National Semiconductor[NSM
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] suggests to me there could be a big catalyst infront of this stock, Najarian adds.
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WILL APPLE FOR EVERYONE STRATEGY BACKFIRE?
Shares of Apple[AAPL
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] closed slightly lower after the conclusion of the tech titan’s developer conference in San Francisco. Investors were stunned to learn that Apple plans to slash prices on its iPhone and MacBook, presumably to make Apple more affordable – and accessible to a larger number of people.
Apple created a niche for themselves by being high-end, explains Jeff Macke. By lowering the price of the iPhone they’ve distinctly changed their brand.
It’s a great move, counters Pete Najarian. Apple only has 11% of the market and by lowering the price of the iPhone they can capture a much larger piece of the pie.
If you’re looking for a trade, be careful here. I think the stock is ahead of itself, adds Guy Adami. It probably pulls back.
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BULL MARKET OR B/S?
Considering the sideways action in the stock market, is the recent rally a sign that the next bull approaches or is the momentum just BS? Find out from Mike Gurka, EmpowerGlobal Funds Global Asset Strategist. Watch the video now!
- Your First Move For Thursday November 12th
- Web Extra: How To Play Wal-Mart Earnings
- Cisneros Gives An Outlook on Housing
- What's the Next Big Acquisition in Technology?
- The Market Reacts To HP's $2.7 Billion Acquisition
- HALFTIME REPORT: Plays for a Dollar-Dominated Market
- Your First Move For Wednesday November 11th
- Web Extra: The Best Trades In Tech
- Pops & Drops: UPS, Electronic Arts...
- Take Your Position: Retail Earnings
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Trader disclosure: On June 9th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Macke Owns (TGT), (AAPL), (AGU); Najarian Owns (BX) Call Spread; Najarian Owns (DELL) Call Spread; Najarian Owns (FCX) Calls & Put Spread; Najarian Owns (INTC) Call Spread; Najarian Owns (MCD) Call Spread; Najarian Owns (MOS) Put Spread; Najarian Owns (PALM) Call Spread; Najarian Owns (WNR); Najarian OWns (AMAT) Calls; Najarian Owns (FLR); Najarian Owns (JPM); Najarian Owns (NSM) Calls; Terranova Owns (TER), (XBI), (ABT), (RIMM), (BTU); Terranova Owns (BRCM) & (BRCM) Calls; Terranova Owns July Crude Oil Futures; Terranova Owns August Crude Oil Futues; Terranova Owns (MS) & (MS) Calls; Terranova Is Short (FCX) & (FCX) Puts; Terranova Owns (GENZ) & (GENZ) Calls; Terranova Owns (HES) & (HES) Calls; Terranova Owns (XOM) Call Spread; Terranova Owns (DIS) Call Spread; Terranova Owns (X) & (X) Calls; Terranova Owns (JPM) & (JPM) Calls; Terranova Owns (POT) & (POT) Calls; Terranova Owns (IBM) & (IBM) Calls
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