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Halftime Report: Is Market Badly Overextended?

Thursday, 19 Nov 2009 | 1:17 PM ET

Stocks traded lower on Thursday with all major indexes down more than 1 percent and the dollar higher due to fears that the market may be badly overextended.

Investors appear to be turning cautious after new data showed mortgage delinquency rates and foreclosure rates not only jumped in the third quarter, but reached record highs.

The same report also said the trend that will likely continue into next year,

That forecast triggered concerns that the sharp rally in riskier assets – such as stocks -- may have been overdone.

Fast Money Halftime Report
The Fast Money traders share their market insight and midday trading advice.

Is the beginning of the correction?

I think the market closes on the lows, says Guy Adami. A lot of the economic data lately hasn’t been that great but investors ignored it. Quite frankly the foreclosure data is catastrophic. Hate to be Debbie Downer but I've been saying for a while that this day would come.

I’m watching the SPDRs, says Jeff Tomasulo of SMB. If the SPDRs get below 109 I’d be concerned about staying long. In fact, I’d look to short financials and some of the higher beta stocks.

And if you're looking for a dollar trade, in the short-term I expect the greenback to correct 10% to the upside as investors seekout the dollar for its safe haven appeal, adds Adami. And as a result I think the S&P falls.

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BIG TECH DOWNGRADE

The bearish sentiment in this market was also triggered by BofA-Merrill, which cut its 2010 growth outlook for the semis and downgraded 10 stocks in the group, including Intel , Texas Instruments and Marvell Technology .

Considering semis were an area that had led the market, how should you trade the space?

I’m keeping a close eye on the Technology ETF, says Greg Troccoli of Opalesque. 22 has been a critical level of resistance and I don’t think we get above it.

In the space, I’m watching Intel, says Eugene Profit of Profit Funds. I think it’s an ancillary play on the release of Windows 7 although it's probably a little early to establish a position.

I would have no problem owning Microsoft (the maker of Windows 7) at these levels, adds Greg Troccoli. I think the downside is limited to 27. But the upside is probably limited to 35.

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TAKE YOUR POSITION: DELL

Shares of Dell traded lower on Thursday ahead of its earnings release due after the bell. How should you game this stock?

What’s the trade?

It seems to me that Dell is overbought, says Greg Troccoli.

Quite frankly in the space I’d rather own Hewlett-Packard, adds Guy Adami.

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TAKE YOUR POSITION: GAP

Shares of the Gap traded lower ahead of its earnings report. Considering the specialty retailer has been called a turnaround story by Fast Money trader Guy Adami, should you get in at these levels?

What’s the trade?

I like what’s going on at the Gap, reminds Adami. And I like the stock going into earnings.

I'd stay away from the entire retail sector, counters Jeff Tomasulo. I just think there are better trades out there.

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TRADE TO GO – TRINA SOLAR

I like Trina Solar, says Guy Adami. At these levels you're chasing, but this is a name that I think is ok to chase.

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CALL THE CLOSE

Guy Adami: I’m a seller.

Greg Troccoli: I’m a seller

Eugene Profit: I’m a seller

Jeff Tomasulo: If weakness continues I’m a seller


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Trader disclosure: On November 19th, 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); Najarian Owns (BP) Calls; Najarian Owns (DELL) Dec. Call, Is Short (DELL) Nov. Calls; Najarian Owns (INTC), Is Short (INTC) Calls; Najarian Owns (MCD) Call Spreads; Najarian Owns (TXN), Is Short (TXN) Calls; Najarian Owns (UUP) Calls; Najarian Owns (YHOO), (YHOO) Puts; Najarian Owns (BG) Calls; Najarian Owns (KG) Calls; Terranova Owns (POT), (GOOG), (AAPL), (SU); Terranova Owns (UNG) April 2010 Calls; Terranova Owns (FDX) Dec. 2010 Calls; Terranova Is Short Crude Oil January 2010; Terranova Owns Crude Oil December 2010

For JoeTerranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
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 (IGE)
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Virtus Investment Partners Owns More Than 1% Of (DBC)
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Virtus Investment Partners Owns More Than 1% Of (UA)

For Jim Iuorio
Iuorio Owns (UN), (MCD), (FXE), (FXC),( DELL)
Iuorio Owns (GLD), (GLD) Puts, Is Short (GLD) Calls
Iuorio Owns (ABX) Calls
Iuorio Owns (NEM) Calls
Iuorio Owns (SLV), (SLV) Calls, Is Short (SLV) Calls
Iuorio Owns (GIS), (GIS) Calls
Iuorio Owns (WMT) Calls
Iuorio Owns Put Spreads In S&P Futures, Is Short Call Spread In S&P Futures

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GPS
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HPQ
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INTC
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MSFT
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SPY
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TSL
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TXN
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SPDR TEC SEL
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