Both the Dow and S&P 500 traded to the downside on Tuesday despite Warren Buffett's big Burlington Northern bet this morning. What's taking us lower and where can you put money to work?
Strategy Session with the Fast Money traders
I do think we are seeing some bullish reaction to the Buffett news, muses Pete Najarian. Remember the futures were substantially lower before the BNI news hit. I think Tuesday's market action could have been a whole lot worse. It seems to me investors are turning bullish on coal due Buffett’s purchase.
I agree, says Jim Iurio of TJM. Without the Buffett news we’d be down substantially. I think the bearish sentiment in the market stems from Fed jitters. When they release their statement on Wednesday, if they say anything even mildly hawskish we could see the dollar shorts get squeezed. And if that happens the markets are likely to sell-off as the dollar climbs.
I’m also closely watching the action in the Dollar Index, says Greg Trocolli of Opalesque. The dollar crossed above its 50-day moving average, which is technically significant. However the trend line is not upward sloping, which is bearish. Personally, I’m long the dollar and a seller into the close.
GOLD HITTING NEW RECORD
Gold futures hit an all-time high $1,081.70 an ounce on Tuesday, surpassing the previous record set Oct. 14, boosted by technical buying and news of a gold sale by the International Monetary Fund (IMF) to India.
How do you play it?
I’m a pure play person, counsels Patty Edwards of Storehouse. So, I play the metal over the miners but with that said I’d continue to hold the GLD but I would not be a buyer at this level.
I'm bullish. Patterns in the chart of gold suggest to me it could go to $1300, adds Greg Troccoli.
It seems to me that gold and miners are moving higher for reasons that are both technical and fundamental, adds Joe Terranova. 1035 was resistance and now I think it’s support. And I agree with Greg that gold is breaking out to the upside.
I’ve spotted bullish call buying in GFI as well as Barrick Gold, adds Jim Iurio. I like playing miners because you tend to get bigger moves in miners then in the spot price.
BUFFETT WATCH: INVEST IN SIMILAR NAMES?
In a deal that stunned the Street Warren Buffett said his company, Berkshire Hathaway, will pay $26 billion to buy out railroad Burlington Northern in what the billionaire investor called a bet on the U.S. economy.
"It's an all-in wager on the economic future of the United States," Buffett said in a statement, adding that railroads are key to the U.S. economy and will benefit as recovery takes hold. "I love these bets."
The deal, Buffett's biggest-ever acquisition, is priced at a premium of 31.5 percent over BNSF's closing stock price on Monday and values the railroad at $34 billion.
What’s the play?
Patriot, Walter, BTU and Massey are all coal plays worth a look, suggests Pete Najarian. Or I’d look downstream at mining equipment makers such as Bucyrus and JoyGlobal . Although both stocks have already run the P/E levels look cheap to me.
I like Genco Shipping as a related play, adds Patty Edwards.
I’d take the other side of all those trades, counters Jim Iurio. Buffett’s time frame is decades and mine is months.
INTEL FALLS ON MORGAN DOWNGRADE
Technology stocks led the way down after Morgan Stanley downgraded the sector to "cautious" from "attractive," and cut its view on Intel saying inventories were beginning to creep up in the sector.
"Chips are very cyclical and tied to economic growth, so if you don't see them being absorbed quickly by the market, people think this recovery is just a little bit softer than expected," says Burt White, managing director and chief investment officer at LPL Financial.
What’s the play?
I’m bullish on Texas Instruments, says Pete Najarian. They seem to be bucking the bearish trend in the sector. I like the fact that they have some top line growth and that they’ve moved into higher margin areas.
CALL THE CLOSE
Pete Najarian: I’m a seller into the close.
Patricia Edwards: I’m a seller.
Jim Iuorio: I’m short. I think dollar worries weigh on the market.
Greg Troccoli: I remain short.
Got something to to say? Send us an e-mail at firstname.lastname@example.org and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to email@example.com.
Trader disclosure: On November 3rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (BCR): 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 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); Seymour Owns (AA); Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (EEM); Seymour Owns (SBUX); Seymour Owns (F); Seymour Is Short (FXI); Seymour Owns (POT); Terranova Owns (GS); Terranova Owns (RIMM; Terranova Owns Dec. Gold Futures; Najarian Owns (HGSI) Call Spread; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (LAZ) & Short (LAZ) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA) & (TEVA) Call Spread; Najarian Owns (WFR) Calls; Najarian Owns (YHOO) & (YHOO) Puts
For Cliff Gallant
Gallant Owns Shares of (BRK.A)
KBW expects to Receive Compensation From (BRK.A)
For Pete Schiff
Schiff is Short the Dollar
Schiff Owns Gold
For Whitney Tilson
Funds Managed By Whitney Tilson Are Long (BRK.a) & (BRK.b)
CNBC.com with wires