Halftime Report: What Triggered Monday's Market Reversal?
The bulls and bears struggled for control of the market on Monday with the S&P paring morning gains and turning negative around lunchtime.
Stronger than expected data on manufacturing and home sales had generated a positive tailwind earlier, but the rally fizzled and negative sentiment prevailed with the trader’s favorite ‘tell’ -- Goldman Sachs – rolling over.
Meanwhile, the Dollar Index came off its lows of the day and began ticking higher.
What dragged down stocks?
The market seems cranky to me, says Joe Terranova . I think the market turned lower on technicals, which look weak. Despite strong economic data this morning fundamentals aren’t driving the market right now, it’s technicals. If you’re looking for a trade, I would not buy the pullback. I think we go lower from here.
I agree, says Mike Khouw of Cantor Fitzgerald. Market action keeps coming back to the technicals not the fundamentals. And I think the stronger dollar is a by product of what’s happening - not a catalyst.
As far as I’m concerned, the cranky mood helped the market, explains Katie Stockton. Last week’s pullback generated an oversold condition for more than half of the S&P. I’m now seeing a short term buy signal. The pullback didn’t take the market below any important support levels, technically. I’d be a buyer.
I think weakness in Goldman is more to do about a WSJ story which says the Treasury Department could scuttle Goldman’s attempt to buy $1 billion in affordable housing tax credits from Fannie Mae and Freddie Mac if it determines it isn’t in the “taxpayers’ best interests,” speculates Jon Najarian. It puts them in the crosshairs of investors who are nervous about the sector. But I don’t think it’s a larger market tell.
TOPPING THE TAPE: FORD
Ford stunned the Street and posted a quarterly profit on Monday, defying Wall Street forecasts for a loss.
Cost cutting and an increased market share led the automaker to raise its 2011 outlook to "solidly profitable" from break-even. Investors took the results to mean Ford has distanced itself from rivals GM and Chrysler, which have struggled to complete restructurings after emerging from government-funded bankruptcies earlier in 2009.
What’s the trade?
I know Ford said 2011, but I think there could be profitability in 2010 as well, says Joe Terranova. I’m a buyer.
And just like Ford stunned the Street with positive news on Monday and shot higher, I think we could see the same kind of action in Motorola after the new Droid phone hits stores.
CHART OF THE DAY: QCOM
Tech investors are closely watching the chip space with Qulacomm set to report earnings later in the week. Considering rival Intel reported profit and revenue that both substantially outpaced expectations, how should you trade it.
Patterns in the charts suggest to me the stock is oversold, says Katie Stockton. I think it’s a buy around $41. The trends suggest the stock could go to $48.
DOLLAR WEAK, COMMODITIES HIGHER
Gold rose above $1,050 an ounce on Monday, wiping out most of the previous week's losses, as dollar weakness made bullion cheaper for holders of other currencies.
As the greenback drifted lower against a basket of major currencies investors grew bullish of commodities with crude oil among the day’s gainers. "
"On a relative basis the U.S. interest rates remain very low. Also, the Fed has been a lot more aggressive on quantitative easing than any other central bank, which is not good for dollar strength,” explains Standard Bank analyst Walter De Wet .
“For the next 6 months were (probably) going to see quite a bit more dollar weakness."
What’s the play?
I think we’re seeing money flow into commodities because it’s the first trading day of the month, muses Joe Terranova. However I like the space long-term and would be a buyer of JoyGlobal and Bucyrus . Both are at valuations I find attractive.
CHINESE NAMES HIGHER, FXI UP OVER 3%
The latest data out of Beijing shows China's economy continues to churn. HSBC's China Purchasing Managers' Index rose to an 18-month high in October of 55.4 from 55.0 in September.
"This suggests that domestic demand is growing rapidly which augers well for energy demand growth in the world's second largest consumer of oil," explains Mike Fitzpatrick, vice president at MF.
What’s the trade?
I’d look at some of the new economy names, such as Sina , New Oriental Education and Baidu, counsels Zach Karabell of RiverTwice. I consider all of these names solid long-term bets on China’s growth. But these names are for the long-term.
CALL THE CLOSE
Joe Terranova: Wait for a pullback. I think we go lower from here.
Jon Najarian: I’m a seller.
Mike Khouw: Sell some premium
Katie Stockton: I'm a buyer into the pullback.
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Trader disclosure: On November 2nd, 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); Seymour Owns (AA), (AAPL), (BAC), (EEM), (SBUX), (F); Seymour Is Short (FXI); Terranova Is Long (GS); Finerman Owns (RIG); Finerman's Firm Owns (CLX) ; Finerman Is Long (BAC) Calls; Finerman's Firm Is Long (BAC) Call Spreads; Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (FLS); Finerman's Firm Is Short (FLS)Calls; Finerman's Firm Owns (MSFT); Finerman's Firm Owns(NOK); Finerman's Firm Owns (PBR); Finerman's Firm Owns (PDE); Finerman Owns (PDE); Finerman's Firm Owns (RIG); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Is Long (TGT); Finerman's Firm Is Long (WMT); Finerman's Firm Is Short (IJR); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (UNG); Finerman's Firm Is Short (USO)
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