Halftime Pt. 1: Trading Most Important Fed Decision Of Year
Both the S&P and Dowedged lower on Tuesday as jittery investors took profits ahead of the Fed statement.
Investors were quickly growing concerned that chatter which suggested the Fed would take additional action to ignite the economy may have been premature.
I think the market is recognizing that the Fed will want more data before they get more aggressive with quantitative easing, says Joe Terranova
How should you be positioned now? The Fast Money traders look at the two possible outcomes:
If Fed does announce quantitative easing…
- Sell the dollar and buy the swiss franc, says Brian Kelly. And you can accomplish that buy buying the Swiss Franc ETF .
- I’d go after consumer staples stocks which have been beaten up, counsels Jon Najarian. My pick is Colgate .
- I’d get long one of the few countries that’s tightening policy, Australia; play it long EWA , says Steve Cortes.
- Keep it simple, buy gold says Joe Terranova.
If Fed doesnot announce quantitative easing…
- Stay defensive, says Joe Terranova. Look at health care and utilities stocks.
- I’d also play health care, echoes Steve Cortes, Pharma in particular.
- Sit on your hands, counsels Brian Kelly.
- I watch options action and I’m seeing activity in the land drillers, says Jon Najarian. My play is long Nabors .
ANALYZE THIS: DOLLAR
The traders are keeping a close eye on the dollar which traded higher ahead of the Fed.
What should you make of the move?
The dollar move higher may have been exacerbated by shorts getting out, explains Marc Chandler of Brown Brothers Harriman. However, it’s worth noting the dollar is shrugging off a lot of bad news.
MARKET BUZZKILL: CHINA
Commodities took a hit on Tuesday after latest data out of Beijing showed slower-than-expected growth in China.
Investors took the results as a signal that the world's third-largest economy may be losing its steam.
"China is certainly the global growth engine for almost all parts of the world, especially to the United States. Their macro data is influencing the psychology of investors of all assets here," explains Craig Peckham, equity trading strategist at Jefferies & Co in New York.
Chinese Imports % Change
*Iron Ore -6.2%
*Crude Oil -74.3%
*Refined Petroleum Products -30.5%
*Steel Products -8.7%
*Copper, Waste & Scraps -157.8%
*Aluminum, Waste & Scraps -68.4%
What’s the trade?
Looking at these results, if you’re overweight crude , I’d think about moving toward market weight, muses Joe Terranova.
I don’t think this is terribly negative, muses Steve Cortes. I still believe in the emerging markets story; a tell will be whether crude closes above or below $80.
MARKET BUZZKILL: CHIPS
Chip stocks took a hit on Tuesday, led lower by Intel , which was downgraded by both Barclays to ‘Equal Weight’ from ‘Overweight’ as well as Baird, which cited “a sharp deterioration in PC-related order trends.
Adding to the headwinds, J.P. Morgan analyst Christopher Danely said in a research note that checks with Taiwanese chip suppliers showed a downturn in orders, indicating that deals for personal computers are "falling off a cliff."
"We believe a host of PC companies pushed out orders throughout the supply chain," Danely said, adding that Hewlett-Packard , Acer and Lenovo appear to be among companies that cut their PC orders
What’s the trade?
I think there are a lot of headwinds in this sector, says Jon Najarian. If you have profits in this space, I’d take them and move to the sidelines.
Around $20 I think Intel looks interesting, says Brian Kelly. But I’d also hedge.
Looking at tech more broadly, in a weak tape, I’d get back into Apple , says Joe Terranova.
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Trader disclosure: On Aug 10, 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 (AKAM), (BAX), (FCX), (MOS), (PFE), (SU), (XBI); Cortes owns (CIB), (FCX), (OAS), (QQQQ); Cortes owns Crude Oil; Cortes is short Gold; Cortes is short U.S. Treasuries
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