On Tuesday investors were trying to make sense of the market after gold burst through the psychologically important $1000 level but both the Dow and S&P 500 continued to climb.
Typically that kind of move signals growing conerns about inflation and fear of economic weakness. What should you make of the move in gold?
Instant Insights with the Fast Money traders
I think gold is certainly muting the rally, speculates Pete Najarian, as investors bet on inflation. But gold isn’t the only commodity that’s moving on Tuesday. Copper is also higher and that’s bullish for stocks.
There will always be investors who are concerned about inflation and they will pile into gold, adds Zach Karabell of RiverTwice. But typically it’s a small inflation hedge. I wouldn’t make too much of what’s happening.
I don’t hold gold in my portfolio, adds Eugene Profit. Personally with gold at $1000 I think it goes down.
OIL SURGES PAST $71
Oil prices posted their biggest gain since the end of July on Tuesday as the dollar slumped to its lowest level in almost a year against a basket of currencies and gold rallied above $1,000 an ounce, its highest since March 2008.
Today's move by gold above $1,000 probably triggered crude markets to rally, spurring inflation fears and causing traders to buy oil as a hedge against inflation," explains analyst Eugen Weinberg at Commerzbank.
What’s the trade?
I think oil trades between $60 to $80 for a while, muses Zach Karabell. However, until we have a major recovery globally and a significant increase in demand from the US I don’t see how oil can really break out.
If you’re bullish oil, I’d get long Suncor, Petrobras or Hess, counsels Fast Money trader Joe Terranova. Or look at Cameron and Weatherford as oil services plays. I think all those names are more attractive right now than the USO.
DOLLAR HITS ’09 LOW VS. EURO
The dollar fell to a one-month low against the euro on Tuesday, with traders citing gold's rally above $1,000 an ounce as a source of broad downward pressure on the U.S. currency.
Renewed concern over the dollar's long-term status as the world's reserve currency sparked by a United Nations agency report on Monday as well as options action fuelled the broad-based dollar selling.
What’s the trade?
I think the weak dollar is a positive for Procter & Gamble, Clorox and other big multinationals that repatriate currency, explains Patty Edwards of Storehouse. But it’s probably a downer for Walmart because it could makes input costs more expensive.
APPLE LEADING TECH HIGHER
Shares of Apple rose on Tuesday after Morgan Stanley raised its price target to $200 from $195. The firm also raised the U.S. systems and PC hardware sector to "attractive" from "in line."
Meanwhile, IBM on Tuesday repeated that it expects to earn "at least" $9.70 a share this year.
In a federal filing, the company also reiterated that it was "well ahead" of its plan of achieving earnings per share of $10 to $11 for 2010.
What’s the trade?
I’d keep an eye on the makers of tech gadgets, says Pete Najarian. PalmRIMM and Apple dominate the space.
I’m bullish Apple, adds Zach Karabell, but that’s a long term position. If you’re a short-term trader I don’t think the media extravaganza is a reason to get long.
OPTIONS ACTION: ENER
Pete Najarian has spotted unusual options activity in Energy Conversion Devices.
The volume of September 12 calls traded on Tuesday suggests to him this stock could go higher.
CALL THE CLOSE
Pete Najarian: I like the market. I think we get a surge into the close.
Patricia Edwards: I’m a seller.
Zachary Karabell: I’d hold.
Eugene Profit: I’m a seller but I’m a buyer of large cap.
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Trader disclosure: On Sept. 8th, 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), (MSFT), (NUE), (BTU); Terranova Owns (EOG), (AAPL), (WFT), (SU); Terranova Owns December Gold Futures; Terranova Works For (VRTS); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman Owns (PDE), (RIG); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares
Finerman's Firm Owns (WMT), (RIG), (MSFT), (NOK), (PBR), (PDE), (TGT), (BDX); Finerman's Firm Is Short (USO), (IJR), (IYR), (MDY), (SPY), (IWM); Najarian Owns (ENER) Calls; Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (BAC) & Short (BAC) Calls; Najarian OWns (C) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (MOS) Call Spread; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (YHOO) Calls
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