Halftime Pt. 1: Bulls To Stage Comeback?
On Thursday both the Dow and S&P traded lower, with a bleak outlook from Cisco dragging down sentiment.
The move left investors wondering whether the bears have come out of hibernation for a while -- or if the decline pushed the bulls onto solid ground.
On Wednesday, all three major indexes recorded their worst percentage declines in more than a month.
What should you be watching as a market 'tell'?
Instant Insights with the Fast Money traders
I’m seeing some positive signs now, explains Guy Adami. They suggest the market could go higher. For example the S&P bounced off its lows nicely, the Vix has collapsed -- meaning fear has come out of the market -- and Intel may have found a bottom around $19.
I’m watching 1088 on the S&P, the 50-day moving average, says Steve Grasso. The market dipped below that level which is a negative signal and could exacerbate a sell off. However, the market must close below that level for a couple days before I’d throw out my positions.
It’s also worth noting that Goldman upgraded Simon Property Groupand Blackstone, adds Jon Najarian. I don’t think they would have done that if they were worried about deflation. Both companies are now on the Conviction Buy list - that may be telling.
Also copper and aluminum are trading well amid a poor tape, adds Steve Cortes. And that may be telling. I agree that deflation is probably not in the cards.
You can see the positive sentiment in copper via action in Freeport McMoRan which opened on its lows and is now trading higher, adds Adami.
However, it’s also worth noting that investors bid safe havens higher on Thursday with the TLT now up about 13% ytd, adds host Melissa Lee.
TECH SLAUGHTER POST CISCO
Tech traded lower dragged down by Cisco whose earnings disappointed the Street Wednesday after the bell. Adding to the headwinds Chief Executive John Chambers noted "unusual uncertainty" about the economy and the computer networking giant forecast revenues below estimates
What’s the trade?
I bought Cisco around $21 which I think that was a gift, says Jon Najarian. I’m long but I don’t think the stock runs for weeks.
Cisco is trading at 16 times forward earnings, says Guy Adami. If you don’t think there’s going to be an inventory build due to a sharp slowdown in the economy the stock looks inexpensive.
I’m seeing clients that were bulled up on technology start to turn bearish, says Steve Grasso.
What do you think? We want to know!
Gold regained strength on Thursday after falling the previous session however traders suggested a firmer dollar was likely to cap gains.
How should you position?
Goldman raised its price target on gold to $1300 within 6 months, reminds Guy Adami. I think that’s put a bid under all metal.
My clients are bullish steel, adds Steve Grasso, specifically US Steel.
TOPPING THE TAPE: GRAIN
Grain stocks topped the tape on Thursday after the USDA cut world wheat production forecast and said wheat supplies will be tighter than expected largely because of the devastating drought in Russia.
Wheat overshadowed the department's bullish forecast for corn and soybean yields that will push both harvests to the largest on record -- larger than expected for the USDA's first report based on field surveys.
What’s the trade?
I’m a buyer of Mosaic , says Steve Cortes. And I like the whole space.
It’s hard to trade equities on the back of moves in soft commodities, says Guy Adami. You can get taken out to the wood shed. If you want to play the space, I’d look at shortingGeneral Mills – but because consumers are cash strapped and are trading down to generic store brands.
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Trader disclosure: On Aug 12, 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; Jon Najarian owns (CSCO) short calls; Jon Najarian owns (VIX) Call spread; Jon Najarian is short (SQQQ); Cortes owns (MOS), (FCX), (TK); Cortes owns S&P 500; Cortes is short (XLF); Cortes is short (BAC); Cortes is short Japanese Yen; Grasso owns (ASTM), (ABK), (BA), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)
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