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Summer Rally Reaches New Heights

The recent rally in the stock market continued today, as the major indexes reached new heights for the year during intraday trading, with the Dow and S&P 500 up nearly 1 percent by the closing bell. Despite finishing up for the day, markets showed weakness and finished off their intraday highs. What was going on with the markets today? The Fast Money traders have the answer.

What’s the word on the street?

Citing strength overnight in China and positive news on the unemployment front, Joe Terranova says the one factor in the market you cannot dismiss is intraday price action. With many stocks hitting their highs early in the day only to have their gains chopped down later in the trading session, he warns that this could be a hint of an impending pullback.

Tim Seymour agrees to a certain extent, although he doesn’t see a significant pullback on the horizon, with revenue growth and many underweight stocks in the field, he sees no reason in the fundamentals that this would be the case. He urges caution in overtrading this market, as the pullbacks are becoming increasingly shallow.

The close today wasn’t encouraging, adds Guy Adami.

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DYNAMIC US TREASURIES

If you take a close look at the flows in the market, you’ll see that both China and Japan are buying into shorter-term holdings, says Joe Terranova, these big buyers are moving away from the 30-year notes in favor of 5- or 7-year maturities.

Foreign buyers and central banks were 63% of today’s auction, says Tim Seymour, pointing out that this is good news for the global demand of US Treasuries.

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VOLATILITY AND SHIFTS IN COMMODITIES

Oil did exactly what it should have done yesterday, says Guy Adami, commenting on the 6% drop the commodity experienced after bearish statistics. Today oil was more of an enigma and if it can’t break a level of around $68.50 per barrel, he thinks the commodity is on its way to $58.

With an affirmation of easy monetary policy in China, there are a lot of people in the commodities trade, says Tim Seymour. He points out that several key places like Turkey and Brazil maintained their rates and you can’t expect any movement in Chinese rates anytime soon.

Remarking on how the strength of the dollar was maintained this week, Joe Terranova points out how the dollar remained strong while Treasury Secretary Geithner was in China, but once he left weakness resurfaced and began affecting the market for commodities.

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EXXON MOBIL DISAPPOINTS

Down over 1 percent on a day when the market saw its rally continue, how do you trade the energy giant? ExxonMobil reported a disaster in earnings that shouldn’t come as any surprise, says Guy Adami, after seeing similarly disastrous reports from other energy names like ConocoPhillips . ExxonMobil is cheap at $68, it’s expensive at $74, and that’s how you trade it, he says.

If you’re looking long term, you have to keep in mind that their production is not growing, says Tim Seymour, noting that analysts pointed to its lack of growth as being one of the negatives for the company.

Karen Finerman suggests if you want to make a trade on straight production, look to plays in oil services for a cleaner bet than on integrated oil. The traders agree that many of the integrated oil names are value plays, including Exxon, Schlumberger,which Guy Adami sees as a good value buy under $50.

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MORE RALLY NAMES AND HOW TO PLAY THEM

Caterpillar experienced a big rebound today after dropping on Wednesday, and Flowserve popping over 11 percent on positive earnings, Karen Finerman sees this as the time when investors will take some profits and trim their holdings. These rebounds seem like a bit of an overreaction, she says.

General Electric, the parent company of CNBC, was also the beneficiary of today’s rally, following an upgrade at Goldman Sachs. Guy Adami sees this as a reasonable level for the company, and would suggest Honeywell as a better play, since it does not have a capital arm dragging it down.

Bank of America CEO Ken Lewis said today that he saw the economy will be coming out of the recession in the second half of the year, and Karen Finerman is bullish on the bank in the long term, noting its strong earnings power.

In the credit card industry, Mastercard was off to the races since it was in the $153 range, says Guy Adami, but sees this as the time to start taking money off the table. Looking at the price action in both Mastercard and Visa Joe Terranova thinks that you can’t stay long those stocks anymore.

For more calls and some after-hours news and how to play it, check out the video!


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XOM
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MV OIL SVCS
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