Stocks were searching for direction on Thursday with investors digesting generally positive earnings reports versus not so positive economic news.
Among the Dow components 3M, Travelers and McDonald's all posted solid results suggesting strength, however, the number of workers filing new jobless claims rose by 11,000 last week, indicating the labor market remains fragile.
Adding to the negative tone, one day earlier, widely followed bank analyst Dick Bove cut his view of Wells Fargo saying loan losses were mounting. However Wells along with Goldman and other banks shrugged off the negative comments and trended higher.
How should you be positioned?
Instant Insights with the Fast Money traders
It seems to me investors are digesting the harsh sell-off that followed Bove’s comments, muses OptionMonster Jon Najarian. Personally, I think it’s positive that the S&P has stabilized at this level. And I’m watching Goldman closely, he adds. Positive momentum in Goldman shares could be a ‘tell’ for the market overall. Into the close, if Goldman goes up, I think the market goes up. Follow the money.
It seems to me resistance at these levels is strong, muses Mike Gurka of Empower. By and large earnings have been beating expectations. With trim payrolls and lower inventories the future may look brighter for Corporate America.
I’m watching the December S&P contract, explains Greg Troccoli of Opalesque. Any close below 1071 and I would sell the S&P outright and take a short position. As for Goldman, I would not be a buyer at these levels. The stock has almost quadrupled since last November. I think upside is limited.
In the banking space I’m watching Capital One, adds Jim Strugger of MKM. Around 37.50, I’d take a shot with a 38- strike call in November.
TAKE YOUR POSITION: MICROSOFT
Tech investors are keeping a close eye on Microsoft Thursday. The software giant reports earnings on Friday before the bell.
Ahead of the results, the company launched Windows 7 OS, its most important release for more than a decade, aiming to win back customers after the disappointing Vista and strengthen its grip on the PC market.
The success of Windows -- which accounts for more than half of Microsoft's profit -- is crucial for Chief Executive Steve Ballmer to revive the company's image as the world's most important software firm
What’s the trade?
I think over the long run Windows 7 will do well, muses Mike Gurka. But on the day-to-day side of trading, I wouldn’t be surprised to see the market anticipate a pullback in this stock.
I would buy Microsoft on weakness, counsels Jon Najarian. And I’d take a look at Hewlett Packard as a beneficiary of Windows 7.
WITH OIL AT $80 TIME TO BUY?
Oil slipped below $81 on Thursday as a stronger dollar encouraged investors to lock into profits from a 12-month high hit the previous day.
On Wednesday, U.S. crude surged to $82, the highest price since October last year, as weekly U.S. government oil data showed a large drop in gasoline inventories over the last week and fuel demand rising about 4 percent year-on-year.
It's also important to note that many analysts think the oil trade is more about the dollar right now than supply and demand.
It is becoming almost imperative to trade the commodity markets from the perspective of the dollar these days, as nothing else seems to count for very much, MF Global wrote in a research note.
What’s the trade?
I’m a buyer, says Greg Troccoli. As long as oil stays above $76 I think it goes to $89.
FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE
BUY AXP? With American Express reporting after the bell today, should you buy?
I’m seeing mild bullish options action, explains Jon Najarian.
BUY BNI? Buffett favorite Burlington Northern is set to report after the bell, should you buy?
I’m a buyer, reveals Mike Gurka. I think the company is well positioned domestically.
CALL THE CLOSE
Jon Najarian: If Goldman goes up, I think the market should go up. Follow the money.
Greg Troccoli : I’m a seller
Mike Gurka : Don’t sell
Jim Strugger from Stamford: I’m buy puts against long stock.
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Trader disclosure: On October 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; Najarian Owns (CEPH) Call Spread; Najarian Owns (LAZ), Is Short (LAZ) Calls, Owns (LAZ) Puts; Najarian Owns (RIMM) Call Spread; Najarian Owns (STX) Call Spread; Najarian Owns (XLF) Call Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (CLX), (MSFT), (NOK), (WMT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG), (CAKE); Finerman's Firm Owns (YUM); Finerman's Firm Owns (BKC); Finerman's Firm Is Short (CPKI); Terranova Owns (SUN), (HES), (NOV), (GS); Seymour Owns (MSFT); Seygem Asset Management Is Short (MELI)
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