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Scaramucci: Markets Should Trade Higher In Back Half of Year

Tuesday, 6 Jul 2010 | 6:06 PM ET

Wall Street rebounded on Tuesday, but strong buying interest evaporated in the afternoon as bearish sentiment reasserted itself.

While the Dow Jones industrial average, Standard & Poor's 500 Index and the Nasdaq Composite Index all posted gains at the close, a Dow rally of 175 points was denied. Traders back from a long weekend were in a buying mood, but then the bears came out reminding the market that China is still slowing, European banks could be undercapitalized and the US is within 5% of a bear market. So how do you protect and profit in this environment?

Word on the Street
The Fast Money traders take a look at today's top business stories.

Instant Insights with the Fast Money Traders

Pete Najarian of optionMONSTER.com is watching action the Volatility Index, which past 37.5% and then fell to the 50-day moving average. He expects continued volatility. When the VIX trades below 30, he thinks about trading in technology stocks, including Apple derivatives plays, like Akamai Technologies or Cirrus Logic .

The bond market was the tell, host Melissa Lee points out. Increased buying shows concern over the economic recovery. Joe Terranova of Virtus Investment Partners didn't think Tuesday's rally felt right.

Tim Seymour of EmergingMoney.com is happy with the market's performance and says the close felt "constructive." The market had a "beautiful open", he points out, until we got bad economic data from the Institute for Supply Management that showed the service sector grew more slowly in June than expected.

However, he says concerns that this new data suggests the economy is weak are overblown. Yet despite the bearish sentiment, we finished above 1028 in the S&P.

Brian Kelly of Kanundrum Capital disagrees. He thinks recent economic data has been poor and can't see any positives in the market closing only slightly higher. He thinks the economy is pushing toward a double-dip recession.

The markets have taken a beating, says Anthony Scaramucci of Skybridge Capital, because of negative headlines and bad economic data. But he thinks the market will trade higher into the back-end of the year because everything has been built in by now. He recommends positioning yourself for a rally.

Like Seymour and Scaramucci, Terranova recommends being a buyer of the market with an eye on volatility because the market can give back gains in the course of any given day.

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TECH STOCKS SELL-OFF

Data in the semiconductor space is "incredible," says Najarian. The Semiconductor HOLDRs has been performing well. He thinks money will continue to rotate into the tech names. Najarian recommends finding a name you like and protecting yourself with puts.

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OIL PRICES CLOSE LOWER

US oil prices fell for a sixth straight session on Tuesday and ended near a one-month low hit overnight. US crude for August delivery fell 16 cents, or 0.22 percent, to close at $71.98 a barrel. It retreated from a $73.86 intraday peak, having earlier touched $71.09, the lowest price since June 8.

The price of oil is tethered to weakening demand, says Terranova. However, he does not recommend being short oil. Instead, go long natural gas. He thinks above-average temperatures will help push nat gas prices higher this summer. Terranova likes Southwestern Energy, EOG Resources XCO Resources and Apache.

Seymour is also bearish on oil, noting that oil prices were down 10 of 12 sessions. He says there is no demand, noting that a lot of the refiners are performing poorly because supply may be coming back online. That's not bullish for oil, he says.

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TOPPING THE TAPE: BP

British oil company BP ruled out a share issue amid talk of sovereign wealth fund interest in a stake, boosting its shares even as the Gulf of Mexico oil slick spread to the Texas coast. RBS is the latest to give the oil giant an upgrade and shares of the London-based company pushed higher Tuesday.

Looking at fundamentals and valuation, Scaramucci thinks the company has enough in cash reserves to handle the costs of the Gulf spill. He thinks Whitney Tilson of T2 Partners might have been right to view BP as a value play.

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STREET FIGHT: ARE KEYNESIAN ECONOMICS DEAD?

Fears of a second-half slowdown continue to pressure the markets, but would another round of economic stimulus work? Mark Zandi of Moddy's Economy.com says if consumers will struggle without it.

Street Fight
Discussing whether spending our way to prosperity will work, with Mark Zandi, Moody's Economy.com.

If another stimulus doesn't come, he expects state and local governments will slash payrolls and raise taxes and small business won't get as much credit. He says that when stimulus goes away, it becomes an economic drag. Essentially, it's a hole that needs to be filled this year and into early next. The economy is too fragile to do without it.

Regarding extending unemployment benefits, Zandi says some workers may be taking advantage of the benefits, but the vast majority are really hard pressed. If unemployment benefits aren't extending for those individuals, they will cut their spending and the economy will take another hit.

With the Bush tax cuts expiring next year, Zandi expects the cuts to be extended. In a few years, the upper 2% of the most wealthy Americans will likely see tax hikes.

Zandi thinks the markets won't have a double-dip recession. He hopes the government will spend money on services and tax cuts to ensure a double-dip doesn't happen.

Click here to see the complete interview with Zandi.


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Trader disclosure: On July 6, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Pete Najarian Owns (CRUS) Call Spreads; Pete Najarian owns (AKAM) call spreads; Pete Najarian owns (GNW); Seymour owns (AAPL), (BAC), (GOOG), (INTC), (POT); Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS); Terranova owns (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135 CALLS; Terranova is short gold

For Tim Seymour:
Seygem Owns (WBD)

For JoeTerranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
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 (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (BAC)
Scaramucci and SkyBridge Capital own (BP)
Scaramucci and SkyBridge Capital own (C)
Scaramucci and SkyBridge Capital own (GOOG)
Scaramucci and SkyBridge Capital own (GS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
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 is short (AMZN)
Accounts managed by Kanundrum Capital is short (RCL)
Accounts managed by Kanundrum Capital is short (XLY)
Accounts managed by Kanundrum Capital is short (XLE)
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (CME)
Accounts managed by Kanundrum Capital is short (EWI)
Accounts managed by Kanundrum Capital is short (EWO)
Accounts managed by Kanundrum Capital is short (GS)
Accounts managed by Kanundrum Capital is short (HIG)
Accounts managed by Kanundrum Capital is short (RKH)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (XLI)
Accounts managed by Kanundrum Capital is short (FCX
Accounts managed by Kanundrum Capital is short (GFI)
Accounts managed by Kanundrum Capital is short (JOYG)
Accounts managed by Kanundrum Capital is short (XLB)
Accounts managed by Kanundrum Capital is short (XLK)
Accounts managed by Kanundrum Capital is short (V)
Accounts managed by Kanundrum Capital is short (PCAR)
Accounts managed by Kanundrum Capital is short (COF)
Accounts managed by Kanundrum Capital is short (KMX)

Deborah Weinswig
Employees Of Citi Own (WMT), (JCP)
An Employee Of Citigroup Global Markets Or Affiliates Is A Trustee Of (TGT) Citigroup Global Markets Or Affiliates Owns 1% Or More Of (SKS) Citigroup Global Markets Or Affiliates Has Managed Or Co-Managed An Offering Of (DG), (KR), (WMT) In Past 12 Months Citigroup Global Markets Or Affiliates Has Received Investment Banking Compensation For Services Provided In Past 12 Months From (DG), (KR), (SKS), (SVU), (TGT), (WMT) Citigroup Global Markets Or Affiliates Expects To Receive/Seek Investment Banking Compensation From (WMT) In Next 3 Months Citigroup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (HD), (JCP), (KSS), (KR), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST) In Past 12 Months (DG), (KR), (SKS), (SVU), (TGT), (WMT) Are Or In Past 12 Months Were Investment Banking Clients Of Citigroup Global Markets (CVS), (DG), (HD), (JCP), (KSS), (KR), (M), (SWY), (SKS), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment Banking, Securities-Related Services) (HD), (JCP), (KSS), (KR), (M), (SWY), (SVU), (TGT), (WAG), (WMT), (COST) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment Banking, Non-Securities Related) Citigroup Global Markets Or Affiliate Received Compensation From (DG) In Past 12 Months Citigroup Global Markets Is A Market Maker In (CVS), (M), (COST) Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To (HD), (JCP), (KR), (LOW), (M), (JWN), (SWY), (SVU), (TGT), (WMT), (COST) Citigroup Global Markets Or Affiliates Owns 5% Or More Of (SKS)

Doug Kass
**No Disclosures**

Mark Zandi

**No Disclosures**

David Riedel
**No Disclosures**

Scott Nations
**No Disclosures**


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  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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