With stocks sideways to lower on Tuesday, investors were wondering if the market was preparing for consolidation after Monday's sharp gain.
Concerns that the market may have run too far too fast may not be unfounded considering the recent advance built on a nearly 7% jump for July, the best month for stocks this year.
Once again headwinds seemed to whip down Wall Street with P&G and Dow Chemical both reporting profits that missed Wall Street's estimates. Also Ford sales disappointed.
Economic data added to the negative tone after factory orders fell steeply in June and pending home sales dropped to a record low.
Is the uptrend still alive? What should you be watching?
Instant Insights with the Fast Money traders
In the options market I noticed a big bearish bet in the SPDRs, explains JJ Kinahan of TD Ameritrade. A big customers bought the 110 - 104 put spread (basically 1100 – 1040 on the S&P). To finance it they sold extra 104 puts.
It’s someone taking a bet of a gradual downward move in the S&P, he explains. At 1040 they have to buy the S&P so it suggests they don’t think the S&P slides any lower than that.
I agree with that bearish bet, Kinahan adds. I'd go short the S&P. I think the market wants to test 1102.
I reduced my exposure to stocks once the S&P broke above 1100, reveals Pete Najarian. I went from about 75% invested to 35%. And where I didn’t take off, I bought puts for protection. I think we see the market sell-off from here.
The one thing that excites me is the XLF , Najarian adds. When I look at how banks have moved to the upside recently it gives me more confidence that broad market gains may be sustainable because the market isn't just being powered by commodity buying. Although I expect to see the S&P pullback I'd be a buyer of dips in the market.
I'm a buyer of dips too, says Brian Kelly of Kanundrum until the FOMC meeting next Tuesday.
FAST FLASH: FORD AUTO SALES
As we mentioned above, shares of Ford slipped on Tuesday after the automaker reported a 0.7 percent increase in US auto sales for July from the same time last year – a far cry from the double digit increase expected from analysts.
As compared to June, the automaker's sales were flat -- dragged down by a double digit drop in Mercury sales. Ford announced in June that it will end production of Mercury at the end of this year.
What’s the trade?
I’m not a buyer, says Brian Kelly. I’d rather be in other places.
FAST FLASH: RESEARCH IN MOTION
Shares of Research In Motion traded mostly lower on Tuesday after the company introduced a revamped version of its BlackBerry smartphone in an effort to attract more customers and compete with Apple's iPhone.
AT&T will be the carrier for the device, named the BlackBerry Torch.
It will go on sale on August 12 for $199.99 with a two-year service agreement. The device has both a touchscreen and slide-out keyboard, and a new operating system called BlackBerry 6 with a new browser.
What’s the trade?
The new gadget suggests to me that RIM can compete with Apple and the others, says Pete Najarian. It’s going to be a big fight but RIM appears to be up to the challenge.
When you look at the technicals it looks to me like Apple is topping out and RIM is just the opposite, muses Steve Cortes. I like long RIM as a contrarian play.
Maybe even look at a long position in AT&T, the carrier of the new device, says Brian Kelly. And AT&T pays a dividend.
In the options markets I’m not seeing that much excitement about this device, reveals JJ Kinahan. I’m cautious.
If you're worried about the device being an iPhone killer don't be, I doubt this will have a dramatic impact on the iPhone, says Tavis McCourt of Morgan Keegan. Apple tends to have a very unique customer base. As for RIM the new device may trigger an upgrade among BlackBerry users so it could drive sales.
Hear more from Tavis McCourt. Watch the video now!
TOPPING THE TAPE: OIL
Oil topped the tape on Tuesday with crude hitting a new 3-month high as the dollar index fell.
What’s the trade?
The Street is brimming with chatter that the Fed may come in a do some quantitative easing, says Brian Kelly. A weaker dollar is good for commodities, broadly.
I think crude goes above $90 just based on increased global demand, says Steve Cortes.
If oil hits $90 I think we see more things being shipped on rails and less on trucks, adds Pete Najarian. That may be something to watch.
TOPPING THE TAPE: EURO
The euro rose to a 3-month high versus the dollar on Tuesday, as Europe’s currency gained support from solid euro zone economic data.
What’s the trade?
I’m starting to turn away from being a euro bull, reveals Steve Cortes. At these levels I’d look to sell.
UNUSUAL ACTIVITY: HERTZ
JJ Kinahan has spotted unusual option action in Hertz .
The action suggests to me at least one buyer is looking for big upside movement, he says.
A CONVERSATION WITH SOLARWINDS CEO KEVIN THOMPSON
In Tuesday’s Call To The Floor, the Fast Money traders talk with the traffic cop for clould computing; SolarWinds CEO Kevin Thompson.
What must you know SolarWinds a company on the forefront of this rapidly developing technology? Watch the video and find out now!
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Trader disclosure: On August 3rd, 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 (V) call spreads; Pete Najarian owns (CNI); Pete Najarian owns (SCCO); Pete Najarian owns (TCK); Cortes owns Oil; Cortes is short gold; Cortes is short Treasuries; Cortes owns (NDAQ); Cortes owns (CIB); Cortes owns (OAS); Cortes owns (FCX); Kinahan is short (SPY); Kinahan is long (HTZ); Kelly owns (BP) puts
For Brian Kelly
Accounts managed by Kanundrum Capital own (RIMM) call spread
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXI
Accounts managed by Kanundrum Capital own Euros
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (OIH)
Accounts managed by Kanundrum Capital own (PFE)
Accounts managed by Kanundrum Capital own (INTC
Accounts managed by Kanundrum Capital are short the U.S. Dollar
For Tavis Mccourt
Morgan Keegan makes a market in (QCOM), (RIMM)
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