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HALFTIME REPORT: Time For a Market Pullback?

Stocks have been flying high over the past four weeks, but today investors have begun taking some profits as the Dow pulled back slightly during intraday trading. Does this mean the end for the summer rally or will today be a small pullback in the market’s upward ascent?

Word On The Street

Some of the buzz on the street has been that stocks have been overbought this summer, but what do the techincals say? The Dow is about 60 points above the moving average, says Greg Troccoli of Opalesque, and he sees this as a sign the market is heading back towards equilibrium.

Joe Terranova looks back at what he calls a “breakdown” in the S&P futures (September contracts) at the end of the trading day Friday. He sees this as the market looking ahead to the FOMC meeting and the upcoming treasury issuance of the 3- 10- and 30- year notes.

Zachary Karabell is skeptical of the rally, as some of the upward action has involved “momentum” stocks – smaller cap names and companies with less-than-perfect credit ratings. Although solid names like IBM and Intel have moved upwards, Karabell has seen a measure of “fear” buying of recent – investors buying into the rally with the fear of missing it - but doesn’t see the general market being pushed significantly by low quality names. He sees this being a very inexpensive market, and that 2009 earnings cannot be compared to 2008 levels, which makes things interesting.

“Low quality” names like Freddie Mac have seen big upward swings today, and the options action on these names have been very strong, says Jon Najarian of Optionmonster.com. Both Freddie Mac and Fannie Mae have many people buying both stock and options at an accelerating pace. He sees these names as low quality, but as survivors in the market, and that is why investors are betting on them right now.


Financials To Head Higher?

Citigroup has seen its shares rising 27% in the last 5 days, is this stock a good bet, or is it still a low-quality name? Joe Terranova points out that the stock is approaching its 200 day moving average, but with today’s relative weakness in the financial sector, you should be cautious where you place your bets.

Goldman Sachs has been considered one of the “best of breed” throughout this rally, and it’s got investors wondering whether it has more potential for profit. After this run, Zach Karabell thinks jumping on Goldman at this point could be a little late in the game, and this thought goes for most financials.


Priceline Profit surges 35%

Online travel agency Priceline.com reported that quarterly profit rose as a result of stronger bookings as demand for travel was stronger than expected during the recession. Greg Troccoli thinks the worst is behind travel names and sees the trend going higher, with good opportunities to find value in the area. “As the fear of job losses abate, people are going to spend the incomes they have,” says Zach Karabell. “It’s a great sign of how the consumer is doing.. and this justifies people’s belief in Priceline” adds Jon Najarian.

For more on the today’s strength in the dollar and whether this is a real move or some strategic short covering, check out the video!

Trade To Go:

Joe Terranova: With an apparent double top in oil, he thinks the play here is to short the commodity.

Call The Close:

Jon Najarian: Surprised how strong the market has been today, he’s a buyer.

Zachary Karabell: If you have some excess cash, taking a dip isn’t a bad idea, but be careful.

Greg Troccoli: I’m a seller.

Joe Terranova: I’m a seller.


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