GO
Loading...

Was Monday’s Rally Just A Head Fake?

Stocks racked up their best one-day gain in over a year on Monday after word of a $1 trillion emergency rescue package from the EU quelled fears that a new credit crisis would derail the global recovery.

However the euro, which rose more than 2 percent during the session, erased those gains to trade only slightly higher by the end of trading in New York.

Was Monday’s rally just a head fake? Could this, in fact, be the calm before the financial storm?

How should you be positioned now?

Strategy session with the Fast Money traders

I’m more nervous on Monday than I was last week, muses Karen Finerman. The fact that the EU had to act in such a big way makes me realize I didn't appreciate the severity of the situation. I’d equate where we are now as somewhere between the TARP announcement and the March 2009 lows.

Looking at the broad market, I’m watching 1165 as a pivot point, says Guy Adami. I don’t see any reason to jump in and establish any new long positions unless we close above that level for a couple days. And if you're bearish I think you can shoot against 1165.

If you want to draw comparisons to our crisis, I can’t quite tell if we’re closer to fall of 2008 or the March lows of 2009, adds veteran traders Gary Kaminksy. As a 'tell' watch to see if the capital markets in Europe become vibrant again. In other words watch for spreads to come in and IPOs come back to market.

And if you're looking for a trade, I would focus on companies that have tethered their outlook to growth in Europe. I feel sure we're going to hear about companies missing earnings estimates as a result of what's happened overseas.

I was surprised to see the euro up at all, says Brian Kelly of Kanundrum. This is an event that debases their currency. We're looking at a controlled weakening of the euro. I expect to see the euro go much lower, he speculates. And I think we're looking at a pronounced slowdown in the global economy.

Developments in Europe put the EU on the same economic path as Japan and I think we hear about deflation for years to come, says Joe Terranova. In this environment I’m a buyer of commodities, he adds. I’d play it longOIH and Potash and Bucyrus .

If you're looking to play the big European banks which rallied on Monday I'm skeptical of Santander , says Tim Seymour, but I'm bullish HSBC and Deutsche Bank.


I hate buying after a day like Monday, says Guy Adami, but if you want to play banks I’d consider a long position in BofA against a short in Wells Fargo.

--------

MARKET BUZZKILL:GOLDMAN SACHS

The traders are closely watching the action in Goldman Sachs which experienced some big intraday swings and turned negative on the session mid-day. It did, however, eek out a half percent gain into the close.

What’s the trade?

I’m watching $147.81 in this stock, says Guy Adami. I wouldn’t jump in until it closes above that level.

--------

THE BIG SHORT GOES LONG

Legendary investor John Paulson, who made a fortune from betting on weakness in housing, did a complete 180-today and turned bullish on the space.

Paulson says he sees a sharp V-shaped recovery in the economy and expects housing prices to rise as much as 5% in 2010 and 12% in 2011.

What's the trade?

I just don't see it, says Joe Terranova. I'd short the mortgage insurers such as Radian , he counsels.

--------

ARE RATING AGENCIES NEXT IN THE SEC'S SIGHTS?

Investors punished shares of Moody’s after the firm said it received a Wells notice from the SEC. (A Wells notice alerts a firm to a potential enforcement action).

In this case, the SEC is probing whether Moody’s may have misled regulators in a 2007 application to remain a nationally recognized rating agency

The SEC is specifically looking at Moody's response to its own finding that in April 2007, members of a European rating surveillance committee had violated its code of conduct.

Moody’s has challenged the finding.

What’s the trade?

I’d stay short, counsels Brian Kelly. I don’t see what the value is in their business model anymore.





______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com 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 fastmoney@cnbc.com.

Trader disclosure: On May 10, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;

For Anthony Scramucci
Scaramucci Owns (MO), Skybridge Owns (MO)
Scaramucci Owns (JNJ), Skybridge Owns (JNJ)

For Tim Seymour
Seymour Owns (AAPL)
Seymour Owns (BAC)
Seygem Asset Management Owns (MTL)
Seymour Owns (CX)

For Guy Adami
Adami Owns (AGU)
Adami Owns (C)
Adami Owns (GS)
Adami Owns (INTC)
Adami Owns (MSFT)
Adami Owns (NUE)
Adami Owns (BTU)

For Karen Finerman
Finerman's Firm Is Short (IYR)
Finerman's Firm Is Short (IWM)
Finerman's Firm Is Short (SPY)
Finerman's Firm Is Short (MDY)
Finerman's Firm Is Long S&P Puts
Finerman Owns (AAPL)
Finerman's Firm Owns (BAC), (BAC) Calls
Finerman Owns (BAC), (BAC) Preferred
Finerman's Firm Owns (BP) Calls, (BP)
Finerman Owns (GS) Calls
Finerman's Firm Owns (IBM)
Finerman's Firm And Finerman Own (JPM)
Finemran's Firm And Finerman Own (RIG), (RIG) Calls
Finerman Owns (WFC) Preferred

For Joe Terranova
Terranova Is Long Gold Futures
Terranova Is Long Oil Futures
Terranova Owns (OIH)
Terranova Owns (BUCY)
Terranova Owns (POT)
Terranova Owns (XCO)
Terranova Owns (PFE)
Terranova Owns (SWN)
Terranova Owns (C)
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Brian Kelly
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (TLT)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Is Short (XLE)
Kanundrum Capital Is Short (XLK)
Kanundrum Capital Is Short (XLI)
Kanundrum Capital Is Short (XLV)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (FDX)
Kanundrum Capital Is Short (CLF)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (HES)
Kanundrum Capital Is Short (SU)
Kanundrum Capital Is Short (CME)
Kanundrum Capital Is Short (MCO)
Kelly Owns (FXE) Puts
Kelly Owns (FXB) Puts

For Dennis Gartman
Funds Managed By Dennis Gartman Are Long Gold; Are Short Euro, Yen
Funds Managed By Dennis Gartman Are Long Australian Dollars, Canadian
Dollars; Are Short Yen, Sterling, Euro
Funds Managed By Dennis Gartman Own (MMM)
Funds Managed By Dennis Gartman Own (DSC)
Funds Managed By Dennis Gartman Are Short (GS)
Funds Managed By Dennis Gartman Are Short (RIMM)
Funds Managed By Dennis Gartman Own (CCI)
Funds Managed By Dennis Gartman Own (PPS)
Funds Managed By Dennis Gartman Own (AAPL)
Funds Managed By Dennis Gartman Are Short (RIMM)
Funds Managed By Dennis Gartman Are Short (GS)
Funds Managed By Dennis Gartman Are Short (GOOD)
Funds Managed By Dennis Gartman Are Short (SPLS)

For Steve Grasso
Stuart Frankel And Its Partners Own (AMR)
Stuart Frankel And Its Partners Own (BAX)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (MERC)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PALM)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PFE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)
Grasso Owns (NDAQ)
Grasso Owns (DYN)
Grasso Owns (LPX)
Grasso Owns (ASTM)
Grasso Owns (ABK)
Grasso Owns (BAC)
Grasso Owns (BGP)
Grasso Owns (C)
Grasso Owns (CVGI)
Grasso Owns (JPM)
Grasso Owns (NEM)
Grasso Owns (PRST)
Grasso Owns (PFE)
Grasso Owns (BA)
Grasso Owns (T)
Grasso Owns (CSCO)
Grasso Owns (X)

CNBC.com with wires



CNBC.com with wires

Symbol
Price
 
Change
%Change
S&P 500
---
BAC
---
DBK
---
GS
---
HSBA
---
MCO
---
POT
---
RDN
---
SAN
---
WFC
---
MV OIL SVCS
---

Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET

Halftime Report