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Halftime Report: Buying Opportunities Amid Monday’s Sell-Off?

On Monday, the traders were closely watching the action in the S&P 500 which turned on a dime – or should we say dollar. A stronger greenback triggered a big intra-day reversal with both commodities and related natural resource stocks tumbling.

Should you sift through the rubble for buying opportunities? Or is the run done?

Instant Insights w/ the Fast Money traders

Leadership in the market has been oil and commodities, explains Fast Money trader Joe Terranova. And a stronger dollar weakens them both. As a result you see the move in the dollar weighing down the S&P. Although I’ve been bullish in the past I would not go picking through the rubble for beaten down stocks, he adds. Not yet. The market looks tired. Personally, I’m out of my positions in both gold and crude oil.

I agree, the momentum is on the negative side, adds OptionMonster Jon Najarian, and not only in commodities but also financials. The money center banks just rolled over after the WSJ reported “BofA’s attempt to repay federal bailout funds and escape the government's grasp has been snagged by a disagreement over how much additional capital the bank must raise to satisfy regulators.”

I’m a buyer of this market, counters Zach Karabell of RiverTwice. The story du jour is the dollar but I don’t think today’s movement in the market means very much unless you’re a very short term trader. If dollar strength leads to a sell-off in Freeport McMoRan, I’m a buyer but as a long-term investment.

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CHART OF THE DAY: DOW TRANSPORTS

Meanwhile the traders are closely watching action in the Dow Transports, which suggest to some analysts that this highly watched index may be showing signs of a double top – traditionally a bearish sign.

The transports have not made a higher high since September 15th, which is a troublesome signal, explains host Melissa Lee. And on a fundamental note, Burlington Northern raised a red flag about freight volumes dragging down this index.

If you’re a Dow Theorist that’s not good. What should you know?

I’m not a Dow theorist and would instead recommend looking at the fundamentals of the market to form a trading thesis, counsels Mike Khouw of Cantor Fitzgerald. I think the pullbacks are probably creating opportunities, albeit selectively.

I expect to see the Transports go lower, counters Jon Najarian. The technical signal described above is a technical signal for a 10% correction. UNP and BNI are probably going to slip.

I think it’s absolutely a mistake to look at the Dow transports as a proxy for the earnings that are driving global earnings, counters Zach Karabell. The Dow Transports are largely made up of companies that operate the North American transport system. US transports are not a proxy for global names.

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CALL THE CLOSE

Mike Khouw: It seems like the sentiment is bearish.
Jon Najarian: I’m a seller into the close.
Zach Karabell: If energy, industrial and commodities sell-off I’d look for opportunities as long-term investments.
Joe Terranova: (Joe use a baseball analogy to explain that he doesn’t see a catalyst to take the market higher)


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Trader disclosure: On October 26th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (BIDU) Dec. Call, Is Short (BIDU) Nov. Call; Najarian Owns (DNDN) Calls, Owns (DNDN) Puts; Najarian Owns (YHOO), Is Short (YHOO) Calls; Terranova Is Short (FCX)

For Joe-Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (DBA)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)

For Dennis Gartman
Funds Managed By Gartman Are Short Sterling
Funds Managed By Gartman Own Canadian Dollar

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Symbol
Price
 
Change
%Change
S&P 500
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TRAN
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BAC
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FCX
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UNP
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