Stocks struggled on Friday as worries persisted about a financial meltdown stemming from the debt crisis in Europe.
The bulls just couldn’t find their footing, despite a positive jobs report which showed the U.S. economy added jobs in April at the fastest pace in four years.
"The market is obviously very shaken up. Concerns about what's going on in Europe are not going away and people perceive the payroll number as being somewhat old news," explains Peter Boockvar of Miller Tabak.
From a technical perspective, the patterns are somewhat worrisome. Over the last two days the S&P broke its 150-day moving average and is approaching the 200-day; a bearish sign.
How should you be positioned now?
Technically there are magnets lower and the S&P has to hold 1095 before I can become a buyer, says Steve Grasso of Stuart Frankel. However, if we get good news out of Europe over the weekend and we see mutual fund inflows on Monday I think the market could pop. But will it hold longer term?
Don't forget that problems in Europe triggered Thursday’s down action, reminds veteran trader Gary Kaminksy, a computer glitch only aggravated an already tense situation. Europe is now coming into a seasonally slow period. The question becomes how hard Europe’s problems hit the United States. I’d stay small. I don’t think this is the end of anything. I think it’s the beginning of much more volatility.
I think this may be a market you want to be more ‘in’ then ‘out’, counters Zach Karabell of RiverTwice. We’ve been looking for a 10% correction and now we’ve seen it. European financial institutions are selling to bolster their balance sheets and when you have a forced situation like this I’d take it as a ‘Buy’ signal because prices are being artificially depressed by an external event.
If you’re looking to play stock picker, it’s important to note that the more exposure a stock has to the euro zone the less likely it is to rally, adds Grasso. For example, Hershey is up but General Mills is down for that every reason.
TECH LEADS PUSH LOWER
Of all the sectors in the S&P tech is seeing some of the heaviest selling, with the Nasdaq off sharply.
What’s the trade?
In the space I’d look at Teradyne and Marvell , says Joe Terranova, but my shopping list is still sitting on my desk. I’m not going out and buying right now. Be patient.
If you’re looking for names to put on your radar, I’d look at Atheros , says Zach Karabell.
Shares of Goldman Sachs traded higher on Friday after the Wall Street Journal reported the company was in settlement talks with the Securities and Exchange Commission over fraud charges.
Then around lunchtime , we heard shareholders rejected a proposal for the firm to split the chairman and CEO roles.
What must you know?
I just think Goldman has to get back to Goldman, says Gary Kaminksy. Over the past several months the firm has become too associated with Lloyd Blankfein. I continue to think we see Goldman clean house.
If you’re trading Goldman, I think the stock will be more influenced by market action than naything else, adds Joe Terranova. If the market rolls over the stock could slip to $135. However, I do believe after financial regulation is passed, it goes higher.
The exchanges came under scrutiny Friday following Thursday’s unusual market action in which the Dow tumbled by nearly 1,000 points before paring over half of those losses.
Market sources say the confluence of events likely triggered electronic selling programs. As that selling commenced, the human element of the markets quickly evaporated and computerized trading programs wantonly sold stocks at whatever price was available, creating a feeding frenzy.
“A lot of these (electronic trading) models become very sensitive when volatility is high," says Aaron Gurwitz, managing director of research, economics and strategy at Barclays Wealth in New York. "It's possible that a lot of these models got to a point where they got strong reduce-risk signals, that things are not working right."
"In that context," he continued, "even a small glitch, a slightly overweight finger rather than a fat finger, could have triggered a lot of the things that happened… we've seen this can be a source of potential systemic risk that really does need to be investigated."
What else must you know?
I think we need to find a way in which to slowdown the markets and a way that can be coordinated, says Rich Repetto, principal at Sandler O'Neill.
* Hear our entire interview with Repetto. Watch the video above
CALL THE CLOSE:
Joe Terranova: Computers are driving the direction.
Steve Grasso: I see no reason to be a hero. There are still magnets lower. The S&P has got to hold 1095.
Zach Karabell: I’m a buyer and a seller. But I think it will be a good week to get in.
Gary Kaminsky: I’d stay small. I don’t think this is the end of anything. I think it’s the beginning of much more volatility.
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Trader disclosure: On May 7, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (MTL); Terranova Owns Gold; Terranova Owns (XCO), (AGU), (SWN), (PFE); Terranova Owns Crude Oil; Terranova Is Short (CMA); Karabell Owns (AAPL), (C), (GS), (CME); Karabell Owns (ATHR); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); jarian Owns (C) Calls; Najarian Owns (CLF) Call Spreads; Najarian Owns (FRX) Calls; Najarian Owns (MS); Najarian Owns (MTL) Preferred; Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Grasso Owns (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (BGP), (C), (CVGI), (JPM), (NEM), (PRST), (PFE), (BA), (T), (CSCO), (X)
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