GO
Loading...

Are Bulls About To Send Bears Into Hibernation?

By Monday’s close the bulls were claiming victory after the Dow turned positive for the year and the S&P 500 ended in the green and above the 1,100 level for the second straight session.

The S&P move may prove to be telling because the index failed at that level several times over the past few weeks. Breaking above suggests the bulls have momentum.

Adding to their case, bulls were also quick to point out that the S&P 500 also rose above its 200-day moving average of 1,113.71. "There is a certain psychological victory there," says Stephen Massocca managing director of Wedbush Morgan in San Francisco.

However bears refuse to go into hibernation entirely. They argue that macro-economic data still largely suggests a slowdown is coming in the second half. They also say that although the market closed above a key technical level, it happened on light volume meaning there was little conviction behind the move.

Looking at fundamentals, a pickup in new home sales combined with a brighter outlook from FedEx underpinned the market moves.

How should you be positioned now?

Instant Insights with the Fast Money traders

Breaking above the 200-day should attract technical investors, explains Joe Terranova. But that alone probably won’t be enough to keep the bullish momentum going.

There’s not enough volume in the market for me to think retail investors are coming back in; that makes me ask myself, “Where will the buying come from?”

I believe money has to rotate out of safe havens and into equities to confirm this rally, he says. Treasuries have not yet broken their 50-day. Gold is now pressing down around its 200-day around 1145. If it breaks below it bodes well for the market. Otherwise it's probably a false rally.

I’m a bear and it hurts, admits Guy Adami. And as far as I can tell the market wants to go higher. As mentioned above, the market move has been on light volume but that doesn’t seem to matter; higher is higher.

I’ve been bearish too, adds Steve Grasso, and I can’t deny the market action, either. However, I remind myself that on June 21st we were at 1133 on the S&P and a week and a half later we were at 1010. The market can turn on a dime.

This rally has been so sharp and in such a short amount of time I’m going to look for things to sell, adds Karen Finerman. True the momentum is higher, but I don’t see any reason that can’t change, yet again. However, I will say that M&A action typically puts a floor under a market and we’re just starting to see M&A percolate.

I’m looking at earnings versus macro-economics, explains Brian Kelly. Corporate America is saying the world isn’t such as bad place but macro-economics says the world is slowing down. For now earnings has won and I’m net long. I expect a tradable rally but I’m not sure about the sustainability.


------

TOPPING THE TAPE: COPPER

Looking at commodities -- copper -- often seen as a barometer for the health of the economy, hit a new 2-month high on Monday.

What should you make of it?

I think we’re at new beginnings for a lot of metals, says strategic investor Dennis Gartman. Many base metals are turning higher, not just copper. The demand for industrial materials is rising. I’ve turned away from being bearish and am now bullish resource stocks.

------

AFTER HOURS ACTION: FLUOR

In extended traders shares of Fluor popped about 2% after the largest publicly traded U.S. engineering company, said it’s backlog jumped to $30.2 billion at the end of the second quarter from $25.7 billion three months before, helped by new awards worth $9.3 billion.

Although the company reported a drop in second-quarter net income, its results easily beat analysts' estimates and it booked a record amount of new orders.

By the numbers, second-quarter net income fell to $157 million, or 87 cents per share, from $169 million, or 93 cents per share, in the same quarter a year before, the company said Monday. Revenue fell 3 percent to $5.15 billion.

Analysts had been expecting earnings of 71 cents per share on revenue of nearly $5 billion from the Irving, Texas-based company, according to the averages on Thomson Reuters I/B/E/S.

What’s the trade?

At 14 times forward earnings I think Fluor is an interesting stock, muses Guy Adami. And in this space I’d also look at McDermott , he says.

------

AFTER HOURS ACTION: LEGG MASON

In the after market, shares of Legg Mason slipped about 3% after the asset manager reported a profit that decreased slightly for its first fiscal quarter ending June 30 on higher expenses.

By the numbers the company reported first-quarter net income of $47.9 million, or 30 cents per share, compared with net income of $50.1 million, or 35 cents per share, in the same period a year earlier.

Analysts had expected the company to report a profit of 31 cents per share, according to Thomson Reuters I/B/E/S. Expenses rose 3 percent to $571 million compared with a year ago.

What’s the trade?

I find these results a little disappointing, says Karen Finerman.

I suspect there’s more room on the downside, adds Guy Adami.

------


ANALYZE THIS: BP

Shares of BP closed sharply higher ahead of the company’s overnight earnings report and also on a growing belief that CEO Tony Hayward would step down within 24 hours.

What should you expect?

Find out from Mark Gilman of The Benchmark Company. Watch the video now!




______________________________________________________
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 July 26, 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; Finerman owns (AAPL); Finerman's firm owns (BP) calls; Finerman's firm owns (PM); Finerman's firm owns (JPM); Finerman owns (JPM); Finerman's firm owns (BAC); Finerman owns (BAC); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (IWM); Finerman's firm is short (SPY); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST); Kelly owns (BP) puts; Kelly is short (GS); Terranova owns (AMZN), (EMC), (CREE), (CRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (GLD), (APA), (FCX), (JOYG), (MMM), (MOS), (GLD), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL)

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)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ELX)
Accounts managed by Kanundrum Capital own (QLGC)
Accounts managed by Kanundrum Capital own (BIG)
Accounts managed by Kanundrum Capital own (GME)
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (NWL)
Accounts managed by Kanundrum Capital are short (GLD)
Accounts managed by Kanundrum Capital are short (EWO)
Accounts managed by Kanundrum Capital are short (EWI)
Accounts managed by Kanundrum Capital are short the Euro
Accounts managed by Kanundrum Capital are short the UK Pound
Accounts managed by Kanundrum Capital are short (JOE)
Accounts managed by Kanundrum Capital are short (IWM)

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 (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 Dennis Gartman
Funds Managed by Dennis Gartman Own (FCX), (PCU), (XLB), (IYT)

For Mike Khouw
Cantor Fitzgerald makes a market in (MEE)

For Niamh Alexander
KBW expects to receive or intends to seek compensation for investment banking services from Nasdaq OMX Group in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in Nasdaq OMX Groupsecurities.
KBW expects to receive or intends to seek compensation for investment banking services from CME Group, Inc. in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in CME Group, Inc.securities.
KBW has received compensation for investment banking services from CBOE Holdings, Inc in the past 12 months.
KBW has managed or co-managed a public offering of securities for CBOE Holdings, Inc in the past twelve (12) months.
KBW currently makes a market and/or acts as a liquidity provider in CBOE Holdings, Inc securities.
CBOE Holdings, Inc currently is, or was during the 12-month period preceding the date of distribution of this report, a client of KBW.
KBW expects to receive or intends to seek compensation for investment banking services from Intercontinental Exchange, Inc. in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in Intercontinental Exchange, Inc.securities.
KBW expects to receive or intends to seek compensation for investment banking services from NYSE Euronext in the next three months.
KBW currently makes a market and/or acts as a liquidity provider in NYSE Euronextsecurities.
Keefe, Bruyette & Woods is a member of the New York Stock Exchange.

For Mark Gilman
***No Disclosures***

For Gary Shilling
***No Disclosures***


CNBC.com with wires

Symbol
Price
 
Change
%Change
DJIA
---
S&P 500
---
BP.
---
FDX
---
FLR
---
LM
---
MDR
---

Contact Fast Money

  • Showtimes

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

Halftime Report