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Halftime Pt 1: Market Facing Suicide Squeeze?

Both the Dow and S&P tumbled on Wednesday as more investors began to fear that talk of a double dip recession was more than idle chatter after the Fed downgraded its outlook on the economy.

Commodities and energy led the way down, with the S&P again in negative territory for the year.

How should you be positioned now?

Instant Insights with the Fast Money Traders

The next key level on the S&P is 1,088 -- the July 30 intraday low which could be support, says Patty Edwards of Storehouse. But if it doesn’t hold the market probably goes to 1060.

Also, other technical analysis suggests the S&P appears to be ‘squeezed' between the 100-day and 200-day moving averages, adds host Melissa Lee a kind of 'suicide squeeze' to borrow a term from baseball.

I look at the squeeze in much the same way I look at a tube of toothpaste caught in a door, Edwards adds. It’s going to spurt out one direction or the other. It's just a question of which way.

My sense is that it’s to the downside, she speculates. I think it’s very important to hedge long positions.


I’m watching the action in the Vix which is up sharply, adds Jon Najarian. It blew right through 26, which is close to the 50-day moving average of 26.81. If we break above that level it suggests the market goes a lotlower. And any way you slice it, the move in the Vix says there’s a lot of fear in the market.

Because of that fear in the market, I’d take overweight positions in risk-on trades and move them to market weight, counsels Joe Terranova. However if you’re looking to put money to work I’m a buyer of ag names such as Potash and ADM on the dip.

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SAFE HAVEN APPEAL

Treasuries, the dollar and other safe havens gained on Wednesday as investors took risk off the table.

What should you be watching?

I'm watching the big move in the dollar, adds Jon Najarian. The Dollar ETF broke above the 50-day and 100-day which suggests there could be a lot more gas in the tank. That says to me investors won't stay short dollar and long euro; the unwind could send the greenback much higher.

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MARKET BUZZKILL: COMMODITIES

Commodities and industrials were the biggest market buzz kills on Wednesday with crude oil extending losses after a surprise build in gasoline inventories.

What’s the trade?

I’d use the pull back as an opportunity to scale into integrated names such as Occidental or Exxon , counsels Joe Terranova.

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TAKE YOUR POSITION: CISCO

Cisco releases earnings on Wednesday after the bell and the Street couldn’t be more eager to hear what they say about the state of the economy.

As we told you Tuesday, with Cisco’s routers and switches providing the backbone for technology infrastructure, Wall Street relies on these results to gauge the health of the technology sector and Corporate America broadly.

In fact, Cisco's earnings call has become so important to the Street - investors typically dissect not only what CEO John Chambers says but the tone in which he says it.

How would you trade it? Tell us now!











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ANALYZE THIS: WHAT IS THE FED’S EXIT PLAN?

Given the recent Fed statement, what is the Fed's exit plan and how do you make money in this environment?

Strategist Gary Shilling was positioned almost perfectly ahead of the announcement.

So how does he recommend positioning now? Watch the video above and find out now.




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Trader disclosure: On Aug 11, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Jon Najarian owns (AKAM) short calls; Terranova owns (AKAM), (BAX), (FCX), (MOS), (PFE), (SU), (XBI); Terranova owns (GLD) Calls

For Brian Kelly
Accounts managed by Kanundrum Capital own (C)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (UNG)
Accounts managed by Kanundrum Capital are short (IAI)

Patty Edwards
Edwards owns (AA) for clients
Edwards owns (GE) for clients
Edwards owns (JPM) for clients
Edwards owns (C) for clients
Edwards owns (BAC) for clients
Edwards owns (VXX) for clients
Edwards owns (AKAM) for clients
Edwards owns (HBC) for clients
Edwards owns S&P 500 for clients
Edwards owns U.S. Treasuries for clients
Edwards owns Gold for clients
Edwards owns Platinum for clients

Gary Shilling
Funds managed by Shilling are long U.S. Treasuries
Funds managed by Shilling are long Eurodollar futures
Funds managed by Shilling are short the S&P 500

Donald Straszheim
***No Disclosures***



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