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S&P Holds 1040; Is That Bullish?

Investors stampeded for the exits Tuesday after the worst day in the market since the May 6 flash crash.

The Dow closed below the psychologically important 10,000 level and the S&P 500 broke below its previous closing low for the year.

The day started badly with the Conference Board making a downward revision in its economic index for China triggering concerns about the ability of that nation to power a global recovery.

Adding to the headwinds, U.S. consumer confidence dropped sharply in June; also the euro traded sharply lower on renewed concerns about Europe’s banks.

However, despite that string of negative catalysts the S&P held the technically important 1040 level.

Is that bullish?


Instant Insights with the Fast Money traders

It speaks to me that the S&P held 1040, says Pete Najarian. Late day the S&P actually dropped below 1040 and then bounced.

Considering the market has been trading on technicals it’s meaningful that we saw buyers at this level, he says.

But there’s no such thing as a quadruple bottom, counters Tim Seymour. I just don’t think the market can hold. I think we’re probably going to 1020 and then 980 after that.

I’m in Tim’s camp, adds Guy Adami. I think we’re going lower and we’re probably going a lot lower. As bellwethers, I’m watching the action in Goldman , Potash and Caterpillar , says Guy Adami. I think all these stocks have room to the downside.

But cash on the balance sheets of companies in the S&P is at its highest levels since the 1950’s, says Anthony Scaramucci. And 22 of the 50 highest yielding stocks have raised dividends. Fundamentals are quite strong. As we go into end of quarter I think Wednesday may be a good time to buy and set up for the second half of the year, he says.

Some technical analysts argue that the selling has just started, says Barry Ritholz, largely because of a bearish pattern in the S&P - thedark cross – when the 50-day moving average crosses below the 200-day. That kind of pattern doesn’t bode well for the next 1 to 3 months. I’d expect things to be dicey at best.

We’ve seen similar dark cross patterns in single stocks throughout the market; especially in steel names and currencies, adds Tim Seymour. That is a very, very ominous sign. I’d be cautious here.

Click here for the technical analysis from Oppenhimer’s Carter Worth on the Halftime Report.

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OUTSIDE THE STOCKS: TREASURIES

Concerns that Europe could drag down the recovery triggered a flight to safety on Tuesday sending the 10-year yield below 3-percent. That’s its lowest level since April of 2009

The 30-year bond also hit a bit of milestone, with yields dipping below to 3.95%, the lowest since October 2009.

What does the action mean?

You can’t have equities move higher with yields this low, says Gary Kaminksy. Money is flooding into Treasurys because investors are desperate for a safe haven.

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VIX SPIKES

The traders were watching the action in the Vix which surged on Tuesday to its highest level since early June.

What should you make of it?

Late day the Vix dropped from it’s highest level, says Pete Najarian. I think the Vix is a little high.

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ANALYZE THIS: IS THE CHINA SLOWDOWN FOR REAL?

As we mentioned above, on Tuesday the Conference Board made a downward revision in its economic index for China triggering concerns about the ability of that nation to power a global recovery.

Specifically they adjusted the index to show a gain of 0.3 percent for April – from a previously reported rise of 1.7 percent.

"Given that China was and continues to be one of the main drivers of the global recovery, any slowdown in China is one of the main risks," says Matthew Strauss, senior currency strategist at RBC Capital Markets in a Reuters interview.

"The market is very sensitive to any indication it might slow down more quickly than anticipated."

What does Dennis Gartman have to say about China. Watch the video and find out now.






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Trader disclosure: On June 29, 2010, 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), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Pete Najarian owns (MRVL), short calls; Pete Najarian owns (HPQ), short calls; Pete Najarian owns (MRVL), short calls; Pete Najarian owns (CMC) a call spread; Pete Najarian owns (TCK), short calls; Pete Najarian owns (AMD) calls; Pete Najarian owns (LLC) a call spread; Pete Najarian owns (C) calls; Pete Najarian owns (BAC); Pete Najarian owns (BBY) a call spread

For Anthony Scaramucci
Scaramucci and Skybridge Capital own (JNJ)
Scaramucci and Skybridge Capital own (ESV)
Scaramucci and Skybridge Capital own (HAS)
Scaramucci and Skybridge Capital own (JPM)
Scaramucci and Skybridge Capital own (BAC)
Scaramucci and Skybridge Capital own (C)
Scaramucci and Skybridge Capital own (GS)
Scaramucci and Skybridge Capital own (HPQ)
Scaramucci and Skybridge Capital own (DELL)
Scaramucci and Skybridge Capital own (GOOG)
Scaramucci and Skybridge Capital own (SPY)
Scaramucci and Skybridge Capital own US Dollars

For Dennis Gartman
Funds Managed By Dennis Gartman Are Short Yen
Funds Managed By Dennis Gartman Are Long Canadian Dollar, Australian Dollar

For Gene Munster
Piper Jaffray makes a market in (AAPL)
Piper Jaffray makes a market in (GOOG)
Piper Jaffray makes a market in (IACI)
Piper Jaffray makes a market in (BIDU)
Piper Jaffray makes a market in (DRIV)
Piper Jaffray makes a market in (YHOO)

For Gary Shilling
Shilling is short equities

Scott Nations
***NO DISCLOSURES***


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