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Halftime Pt. 1: Odds Favor Bear Market Or Correction?

Buyers nudged stocks higher Wednesday, one day after a heavy sell-off sent the S&P to an 8-month low.

As bulls will quickly tell you, the S&P held 1040 - a key technical level - which they say means the market may have found its bottom.

However bears argue that the S&P made a new correction low yesterday, a clear sign of a downtrend.

The latest research from Bespoke suggests the bearish argument may pan out.

According to Bespoke; the market is currently down over 14% from its April highs. They say of the 32 times a drop of 14% or more has happened -- only seven times has it not turned into a bear market.

How should you position now?

Instant Insights with the Fast Money traders

Traders on the floor are still extremely negative, reveals Steve Grasso. Tuesday was the first time this year the market closed below 1050. That’s bearish. I think Wednesday's gains are a dead cat bounce and I'd sell into strength.

I’m watching 1025 as a critical level, says Joe Terranova. Below that level, the chart of the S&P looks broken. I admit there are plenty of headwinds, but nothing is typical about this market so 2010 could be exception to the rule laid out by Bespoke above.

Personally, I think it will be very difficult to establish any trend next quarter, Terranova adds. I think the way to play the market is with pairs trade; get in and get out quickly.

I’m bearish, adds Brian Kelly. We’re still looking at a slowdown in Europe. You can’t cut budgets, raise taxes and have economic growth, he says. If the market rallies I'd use the opportunity to take profits.

I don’t like this market either, says Patty Edwards. Broadly I'm negative but I do think you can find opportunity if you pick and choose.

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OIL: QUARTERLY DROP

Oil traded lower Wednesday, with the commodity heading for its first quarterly drop since 2008, despite hitting a 19-month high of over $87 in May.

What should you make of it?

Over the next 6 months I think the trend in oil is higher, muses Joe Terranova. Long dated future contracts are trading around $85 and I think they get to $100 by the end of the year. I'm a buyer of this weakness.



Elsewhere in the space, I’d look at nat gas, adds Terranova. It’s underperformed in the first half of 2010 and I think it’s part of the longer term energy story for this nation, I’d play it with a long position in UPL.

Next quarter I think energy moves higher broadly because the entire sector sold-off due to uncertainty stemming from the BP gulf spill, adds Steve Grasso.

If you’re bullish energy I’d play Chicago Bridge and Iron, says Patty Edwards. Buy the company that supplies the shovels.

The only way I see oil going higher is on geo-political risks, counters Brian Kelly. To me it looks like a well supplied market with a global economy that’s slowing down. I wouldn’t be long.


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AG STOCKS

After seeing heavy selling pressure over the last three months, investors bid a few of the ag names higher on Wednesday after the latest report from the Department of Agriculture was bullish for corn and soybeans.

What’s the trade?

CF and Potash should spike higher on this news, says Steve Grasso.

However, Agrium and Intrepid Potash are underperforming, adds Joe Terranova. If you’re going to play the space be extremely selective.

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FAST FLASH: MONSANTO

In the ag space Monsanto hit a 52-week low on Wednesday, a level not seen since 2006.

How should you play the weakness?

I only see sellers in this name, reveals Steve Grasso.

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TOPPING THE TAPE: FORD

Ford topped the tape on Wednesday after it announced it will reduce its huge debt by another $4 billion as it continues to show signs of financial strength.

What’s the trade?

I’d look at a long position in Ford as well as Toyota and Tata because the auto story is a global story, says Patty Edwards.

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CALL TO THE FLOOR: HIGH-END ROLLOVER SIGNAL DOUBLE-DIP?

Shares of auction house Sotheby's have been under immense pressure, down nearly 30% in the last month alone amid signs the art market has topped out.

Is the action a sign that the high-end consumer is weak?

Not according to Sotheby's CEO Bill Ruprecht.

He tells us, “people who buy works of art behave differently than people who live in the broad economy… these are people of immense wealth and they’re not operating with a primary eye on today’s stock market or tomorrow’s stock market.”

What else should you know about Sotheby’s? Watch the video and find out now!

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Trader disclosure: On June 28, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova owns (IPSU), (BX), (AGU), (PFE), (TER), (GMCR), (RSX), (TER), (AXP), (KO), (KR), (COST), (AMZN), (TEVA), (BMO), (DIS), (XCO), (SWN), (GMCR), (IPI), (SU), (XOM), (RDS.A), (COP), (OXY), (V), (FXB), (UPL), (JPM), (MS), ( C), (BAC), (GMCR); Terranova owns (GLD) 123 JULY PUTS; Terranova owns (FS) 135 JULY CALLS; Terranova owns (GLD) July 120 puts; Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS); Grasso owns (ASTM), (ABK), (BAC), (BGP), (C), (DYN), (JPM), (LPX), (NDAQ), (PRST)

For Joe Terranova
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 (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
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own (GDX)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own Gold
Accounts managed by Kanundrum Capital own Treasuries
Accounts managed by Kanundrum Capital own US Dollars
Accounts managed by Kanundrum Capital are short British Pound
Accounts managed by Kanundrum Capital is short (AMZN)
Accounts managed by Kanundrum Capital are short (RCL)
Accounts managed by Kanundrum Capital are short (XLY)
Accounts managed by Kanundrum Capital are short (XLE)
Accounts managed by Kanundrum Capital are short (AFL)
Accounts managed by Kanundrum Capital are short (CME)
Accounts managed by Kanundrum Capital are short (EWI)
Accounts managed by Kanundrum Capital are short (EWO)
Accounts managed by Kanundrum Capital are short (GS)
Accounts managed by Kanundrum Capital are short (HIG)
Accounts managed by Kanundrum Capital are short (RKH)
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (XLI)
Accounts managed by Kanundrum Capital are short (FCX
Accounts managed by Kanundrum Capital are short (GFI)
Accounts managed by Kanundrum Capital are short (JOYG)
Accounts managed by Kanundrum Capital are short (XLB)
Accounts managed by Kanundrum Capital are short (XLK)
Accounts managed by Kanundrum Capital are short Oil
Accounts managed by Kanundrum Capital are short the S&P 500
Accounts managed by Kanundrum Capital are short the Canadian dollar
Accounts managed by Kanundrum Capital are short the Euro vs. Yen
Accounts managed by Kanundrum Capital are short the Aussie Dollar
Accounts managed by Kanundrum Capital are short (CAT)
Accounts managed by Kanundrum Capital are short (MET)
Accounts managed by Kanundrum Capital are short (WYNN)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (IP)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (AAPL)

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (BAC) for clients
Edwards owns (BBY) for clients
Edwards owns (C) for clients
Edwards owns (COP) for clients
Edwards owns (CVX) for clients
Edwards owns (DELL) for clients
Edwards owns (DO) for clients
Edwards owns (GE) for clients
Edwards owns (GLD) for clients
Edwards owns (GOOG) for clients
Edwards owns (GLW) for clients
Edwards owns (HAL) for clients
Edwards owns (HPQ) for clients
Edwards owns (INTC) for clients
Edwards owns (JPM) for clients
Edwards owns (JNK) for clients
Edwards owns (MS) for clients
Edwards owns (MSFT) for clients
Edwards owns (NE) for clients
Edwards owns (NSC) for clients
Edwards owns (NVDA) for clients
Edwards owns (PNC) for clients
Edwards owns (QQQQ) for clients
Edwards owns (RIG) for clients
Edwards owns (SLB) for clients
Edwards owns (SPY) for clients
Edwards owns (STI) for clients
Edwards owns (STM) for clients
Edwards owns (TXN) for clients
Edwards owns (UNP) for clients
Edwards owns (VXX) for clients
Edwards owns (VZ) for clients
Edwards owns (WFC) for clients
Edwards owns (WFT) for clients
Edwards owns (XOM) for clients
Edwards owns gold for clients
Edwards owns platinum for clients
Edwards owns silver for clients
Edwards owns the Russell 2000 for clients
Edwards owns the S&P500 for clients

For Whitney Tilson
Funds Managed By Tilson Own (BP)
Funds Managed By Tilson Own (MSFT)

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