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In an Uncertain Market, Quality is King

On a day when the market seemed confused - moving within relatively a wide range and ending the day to the downside - there were many reasons why this confusion was warranted.

Fed Chairman Ben Bernanke talked about the potential for higher interest rates, word came that Greece will likely get bailed out and swings in the US dollar caused fluctuations in commodities and commodity stocks throughout the trading day. As the market churns and investors take sides, what trades can you be making in this environment?

Word on the Street

Giving clarity to the confusion, Pete Najarian points out that the market has been trading in a range, with the S&P 500 operating in a range that finds support above 1,050, and that volatility has not spiked, signaling that there is no widespread investor panic. Looking at the volumes, however, Najarian thinks that speaks more than anything: most big ETFs showing big gaps in normal volumes, and companies like Apple trading at less than half of its normal daily volume, "the volume just wasn't there today... don't read too much into today's action," he says.

In this market, Joe Terranova cautions to "stay away from the dollar trade... stay away from anything coming out of the currency world," noting that investors have "no idea" what is coming out of Greece tomorrow and the theme of uncertainty is not something investors want to be involved with. Right now, everyone is watching the 150-day moving average of the S&P 500, which is 1060, says Steve Grasso, who thinks if we get some closure on sovereign debt the index could push up to 1080.

Depending on what happens in the Greek bailout situation, investors are wondering what result this will have on debt of other governments. "We're going to hear more about Greece," says Tim Seymour, but he sees the dollar rallying for reasons beyond the troubled country. He sees stimulus being pulled back in China, past treasury note auctions that have lacked fervor and rates set to rise around the world. Watch the PPI and CPI numbers tonight, he says.

Gary Kaminsky adds to the discussion the three keys he thinks must happen before the market has any sort of substantial move to the upside. First, rates would have to go up, which was signaled today. Second, M&A activity must increase, which would show that corporate CEOs are confident in their prospects. Lastly, the IPO market must show increased signs of life, which would send a strong signal that supply and demand of equities is in balance.

As Rates Rise, Quality is King

Since December 1st, 47 S&P 500 companies have raised their dividends, while only two companies have lowered their yields. Pete Najarian adds the many reasons he is a hawk for quality and strategy over anything else, which is representative of what he considers to be his core holdings. They have diversified assets, they pay dividends and they show some form of growth, whether through acquisitions or exposure to emerging markets. He brings up Pfizer as one of the names he considers to be of high quality. In the energy space he like BP, while another company that comes to mind is Teva Pharmaceuticals .

The trade right now may be moving away from the high beta names, adds Joe Terranova, who agrees that high quality names are the place to be, because through all the uncertainty you can still see strong fundamentals, he says, suggesting companies like Disney.

All of the integrated oil companies are paying dividends between 5-7%, says Tim Seymour, who also points out that Exxon Mobil maintains a dividend of 3% and it is only slightly above its March lows. Exxon is a strong company that is getting punished and does not need oil to be at $80, he says.

Confounding Commodities

With worries from Greece and China set to tighten its economic policy, commodities have been on a wild ride so far in 2010. How do you navigate these uncertain waters?

Tim Seymour points out that steel companies have inherently high beta, like ArcelorMittal, which has benefited from high iron ore prices in the past is 25% off of its highs. Seymour looks to own the company around $36.50. The traders also looked at US Steel , which they described as a "broken" stock that's been overdone and is hovering around its 200-day moving average. BHP Billiton , a company that has a good balance sheet, investors were slightly underwhelmed at the dividend the company is paying, but Seymour thinks the company told investors everything they wanted to know when it reported earnings and he thinks it is saving cash to fund acquisitons and internal growth.

When you look at the commodities space, says Joe Terranova, the one that stands out is oil, which he expects to fundamentally remain strong. He thinks a short trade on oil would be a bad move.

Analyze This: Gartman on the Greece Bailout

With fears of potential default looming over the Eurozone's weakest economy, Dennis Gartman helps put this situation into perspective. "There will be some sort of bailout," says Gartman, "it just depends on how great the scale will be. They will relieve the pressure the market now feels." He assures that it will be nothing like the bailouts that occurred in the US, but the problem of helping out Greece is that other weak economies will come looking for handouts, and the problem becomes a domino effect.

"I think the EU is at a crossroads," he continued, saying that he never truly believed that the EU system was sustainable over the long term, suggesting that "the cloth is fraying." He is positioning himself long Australian and Canadian dollars, short the Euro and the pound Sterling, which are positions that he has held for some time and continues to build upon.

Both Germany and France must be in agreement as to how to handle this process, Gartman says, doubting that Germany will want to go all-out in their efforts to help Greece.

"This is the European AIG," adds Tim Seymour, "they can't let this thing drop."

Gartman concluded on a down note for commodities, saying that he believes "the best of the commodity market is behind us," but "the last thing I would be short on is crude oil."



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Trader disclosure: On February 10th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL) Call Spread; Najarian Owns (BP), Is Short (BP) Calls; Najarian Owns (DIS), Is Short (DIS) Calls; Najarian Owns (JNJ); Najarian Owns (MS), Is Short (MS) Calls
Najarian Owns (PFE); Najarian Owns (XLF) Calls; Najarian Owns (HIG) Calls

Seymour Owns (AAPL)
Seymour Owns (BAC)
Seymour Owns (F)
Seymour Owns (FCX)
Seygem Asset Management Is Short (VALE)
Seymour Owns (X)
Seymour Owns (EMB)
Seymour Owns (MSFT)
Seymour Owns (VIP)

Terranova Owns (BAC); Terranova Owns (JPM); Terranova Owns (OIH); Terranova Owns (DELL); Terranova Owns (MSFT); Terranova Owns (EMC); Terranova Owns (AAPL); Terranova Owns (GOOG)

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)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (SKT)

Grasso Owns (ABK); Grasso Owns (AAPL); Grasso Owns (ASTM); Grasso Owns (BAC); Grasso Owns (BGP); Grasso Owns (C); Grasso Owns (COST); Grasso Owns (CSCO); Grasso Owns (FAZ); Grasso Owns (PFE); Grasso Owns (PRST); Grasso Owns (WMT); Grasso Owns (V)

Stuart Frankel & Co. Inc. And Its Partners Own (ABX)
Stuart Frankel & Co. Inc. And Its Partners Own (CUBA)
Stuart Frankel & Co. Inc. And Its Partners Own (GERN)
Stuart Frankel & Co. Inc. And Its Partners Own (GLG)
Stuart Frankel & Co. Inc. And Its Partners Own (HSPO)
Stuart Frankel & Co. Inc. And Its Partners Own (NWS.A)
Stuart Frankel & Co. Inc. And Its Partners Own (NXST)
Stuart Frankel & Co. Inc. And Its Partners Own (NYX)
Stuart Frankel & Co. Inc. And Its Partners Own (PDE)
Stuart Frankel & Co. Inc. And Its Partners Own (PRST)
Stuart Frankel & Co. Inc. And Its Partners Own (RDC)
Stuart Frankel & Co. Inc. And Its Partners Own (ROK)
Stuart Frankel & Co. Inc. And Its Partners Own (TLM)
Stuart Frankel & Co. Inc. And Its Partners Own (TOL)
Stuart Frankel & Co. Inc. And Its Partners Own (XRX)

Stuart Frankel & Co. Inc. And Its Partners Are Short (QQQQ)
Stuart Frankel & Co. Inc. And Its Partners Are Short (CL)

DENNIS GARTMAN

Funds Managed By Gartman Are Long Canadian Dollars, Australian Dollars
Funds Managed By Gartman Are Short British Pound Sterling, Euro
Funds Managed By Gartman Own (KBE)
Funds Managed By Gartman Are Short (XLF)
Funds Managed By Gartman Own (WMT)
Funds Managed By Gartman Own (FDO)
Funds Managed By Gartman Are Short (RL)
Funds Managed By Gartman Are Short (SPG)

TODD GORDON

Gordon Is Short Australian Dollar

TOM LYDON

Lydon Is A Board Member Of Rydex/SGI

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