On the last trading day of the month, the Dow and S&P turned sharply lower around lunchtime with investors eager to move to the sidelines.
Negative sentiment seemed to prevail after a Labor Department report showed personal spending dipped 0.5 percent in September, while personal income was flat.
Those figures again turned attention to the fragile state of the consumer – which is considered vital to a recovery because consumer spending accounts for more than two-thirds of all U.S. economic activity.
Also the dollar turned higher. Lately the greenback has had an inverse impact on equities.
On the final trading day of the month, the S&P 500 was down 0.99 percent for October. If the index is unable to hold onto the month's gains, it will snap a seven-month winning streak
What should you be watching?
I think we’re looking at more of a psychological phenomenon in the market than anything else, says Steve Grasso of Stuart Frankel. This is the last day of the fiscal year for most mutual funds. Usually we see losses in October and this time we’ve had gains. So money managers are locking in profits on the last day of the month.
But that doesn’t change the fact stocks are selling off. I’m watching 1042 on the S&P, he adds. If we close below that level, technically we open the door to S&P 1000.
I think the action is absolutely horrible, adds Joe Terranova. Technically it looks awful. If the E-Mini S&P futures break below 3700 I think we may have an ugly close.
Warren Buffett often says be fearful when other are greedy and greedy when other are fearful. I ‘do’ think you can dip your toe into best of breed names, especially in commodities, he adds. But only do it knowing that declines are coming from professional investors who are moving to the sidelines because they are fearful of what they’re seeing in the market.
The S&P hit my big upside target of 1100, adds Bill Strazzullo of Bell Curve. I think we could be putting in an intermediate top. If you’re long I’d be talking profits.
And if you’re a speculator, I also think you can be aggressive on the short side. Patterns in the S&P suggest to me that 1030 is a critical level. If we break that then I think we move down to 1000. And the move down could be as steep as 950 after that.
I watch volatility and it’s clearly returning to the market, adds Brian Stutland of Stutland Equities. If the Vix closes above 28 I’d be a buyer of volatility and prepare for swings in the market.
FINANCIALS LEADING MARKET LOWER
Financials led the market lower on Friday after the economic data mentioned above renewed concerns about the public’s ability to make mortgages and credit card payments.
What’s the trade?
Since JPMorgan released earnings, the financials haven’t done much, explains Joe Terranova. The only stock in the space I’d consider is Goldman. Around $170, I’d consider buying. But I have to admit I'm long Goldman and I’m nervous.
I’m watching BofA, says Brian Stutland. I’m a buyer of the November 6/17.5 call spread.
The U.S. dollar made gains on Friday after steep losses in the previous session as investors turned to the greenback as a safe-haven amid Friday’s sharp sell-off.
"We're seeing some weakness in equities probably due to some month-end selling and that pushed the dollar higher," explains Shaun Osborne, chief currency strategist at TD Securities.
Also, since the dollar sold off most of the month, fund managers may need to buy back the dolar to maintain hedge ratios at the end of the month.
Meanwhile, the stronger dollar dragged down the price of crude with investors also growing concerned that the recent pop may be ahead of supply and demand fundamentals.
What’s the trade?
I think the correlation between stronger dollar and weaker market is overdone, says Dennis Gartman. Germany has a stronger currency and a stronger market.
I think dollar weakness is probably presenting an opportunity for dipping a toe into best of breed names, especially in commodities, says Joe Terranova. But do it knowing that declines are coming from professional investors moving to the sidelines because they are fearful of what they’re seeing in the market.
CALL THE CLOSE
Joe Terranova: I’d move the sidelines
Steve Grasso: I’m a seller. I don’t like the feel
Bill Strazzullo: I’m short and staying short.
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Trader disclosure: On Oct. 30th, 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); Finerman Owns Puts (BAC); Finerman Owns (PDE), (FLS), (RIG), (WMT); Finerman's Firm Owns (MSFT), (NOK), (PDE), (RIG) (TGT), (WMT); Finerman's Firm Is Long Puts (AMZN); Finerman's Firm Is Long Puts (BAC); Finerman's Firm Is Long Call Spreads (BAC); Finerman's Firm Is Long (FLS); Finerman's Firm Is Short Calls (FLS); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (UNG), (USO, Terranova Owns(GS); Seymour Is Short Puts (AA); Seymour Is Long Puts (BAC); Seymour Is Long Puts (BX); Seymour Is Long Puts (EEM); Seymour Is Long Puts (F); Seymour Is Short Puts (FXI); Seymour Is Long Puts (LVS); Seymour Is Long Puts (MSFT); Seymour Is Short F (PBR); Seymour Is Long Puts (SBUX)
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