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Halftime Pt. 1: Is Market About To Climb, Or Tumble?

Investors were grappling with the market's next move on Monday after falling tech shares offset gains in utilities , health care and other defensive sectors.

With the S&P and Dow trading sideways on Monday, what should you be watching as a signal of the next big move?

Instant Insights with the Fast Money traders

I'm watching 1070 on the S&P -- last week's low - as a key level, explains Tim Seymour. So far that's been support. I think the market's next big move will be dictated by whether that holds.

Considering the amount of M&A activity we’ve seen over the past 2 weeks I’d have thought the market would be higher, muses Steve Cortes but I remain constructive and I remain long – for now.

The recent M&A deals aren’t terribly constructive on the economy, adds Brian Kelly. They don’t create jobs, they don’t build factories -- in fact they consolidate everything so there’s no reason to believe the deals will boost stocks. Into the close the market fells heavy, he adds. I'm a seller.

With Apple and RIM down, the Nasdaq will likely close lower, but I'm optimistic on the S&P, adds Jon Najarian. I expect to see more M&A in the weeks ahead and ultimately I do think it provides a catalyst for stocks.

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ANALYZE THIS: 3PAR

It appears Dell is looking at some stiff competition in its quest to acquire data storage company 3Par.

According to TechCrunch, HP this morning sent a counter offer to 3Par’s board, proposing that it would buy the company for $1.6 billion in cash — or $24 a share, compared to Dell’s offer of $18 per share.

The deal was approved by HP’s board, and only needs the approval of 3Par’s board to be finalized. Once approved, HP expects the transaction to close by the end of the year.

What’s the trade?

In the space I’d expect 3Par rivals Compellent , CommVault and Isilon to climb as a result, says Aaron Rakers of Stifel Nicolaus.

* Will Dell up their bid for 3Com? Hear what the Fast Money traders have to say. Watch the video now!


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BOND BUBBLE?

With stocks trading around break even on Monday the Fast Money traders were closely watching action elsewhere amid chatter of a bubble.

We’re talking about the usually staid bond market.

Despite a relative weak stock market, bond prices Monday morning were also lower – (in other words, yields were higher)

What should you make of the action?

To bulls, the rally is still in its early stages. They say the weak economy will cause stocks to keep falling and people to seek the safety of U.S. government debt.

The bears, however, argue Treasury prices have risen too high, perhaps even to bubble proportions. (The thinking goes that investors could dump Treasurys as quickly as they bought them on even a whiff of inflation. Inflation is bad for bonds because it eats into principal.)

As you may remember, last week The Wall Street Journal published a letter from Wharton professor Jeremy Siegel and Jeremy Schwartz, director of research at Wisdom Tree Investments Inc., that likened Treasurys to dot-com stocks of the late '90s before they crashed.

Instant Insights with the Fast Money gang

I think comparing what’s happening in bonds now to the tech bubble is nonsense, says Steve Cortes on Fast Money. In the tech bubble stocks could go to zero and all principal was lost. If you hold a bond to maturity you get the principal plus interest. With that said, I’m skeptical of the bond market and I’m short.

The TLT is up something like 20% on the year, adds Brian Kelly. Maybe it’s not a bubble but it's probably overdone.

I'm not terribly worried about a bubble; I expect money to continue rotating into the bond market, says Tim Seymour. There's no catalyst to change that trend.

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HUNGARY CURRENCY

Worries about Hungary are making waves in the market Monday with the traders closely watching the action in that nation’s currency.

What should you make of it?

I’d watch Banco Santander, says Steve Cortes. It’s having a lot of trouble maintaining $12. If it continues to have trouble there then I think there’s not only smoke but fire in Europe.

70% of the mortgages in Hungary are nominated in Swiss francs, adds Brian Kelly. I’d watch Austrian banks and Italian banks; they're heavily exposed to Hungary.



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Trader disclosure: On Aug 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes owns (FCX), (SFD), (SPY); Cortes is long Corn; Cortes is short (BAC); Cortes is short (XLF); Cortes is short Japanese Yen; Cortes is short U.S. Treasuries; Seymour is long (POT; Jon Najarian owns (POT) and short call; Jon Najarian owns (VMW) and short call; Jon Najarian is long (DBA) put spreads

For Tim Seymour
Seygem Asset Management is long (RTP)

Brian Kelly
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own Swiss Franc
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (TBT)
Accounts managed by Kanundrum Capital are short the U.K. Pound
Accounts managed by Kanundrum Capital are short the Peso
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (AFL)
Accounts managed by Kanundrum Capital are short (MCO)
Accounts managed by Kanundrum Capital are short (IAI)

Aaron Rakers
Within the past 12 months, Citigroup has acted as manager or co-manager of an offering of securities of (MCD)

Citigroup has received compensation for investment banking services provided within the past 12 months from (MCD)

Citigroup received compensation for products and services other than investment banking services from (BKC), (MCD) in the past 12 months.

Citigroup currently has, or had within the past 12 months, the following as investment banking client (MCD)

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: Burger King Holdings, Inc., McDonald's Corp, Hain Celestial Group Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: Burger King Holdings, Inc., McDonald's Corp

Analysts' compensation is determined based upon activities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates ("the Firm"). Like all Firm employees, analysts receive compensation that is impacted by overall firm profitability which includes investment banking revenues.

The Firm is a market maker in the publicly traded equity securities of Hain Celestial Group Inc, United Natural Foods Inc, Whole Foods Market Inc.

CNBC.com with wires.

Symbol
Price
 
Change
%Change
DJIA
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NASDAQ
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S&P 500
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CVLT
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4331
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HPQ
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PAR
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BB
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SAN
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ISH BAR 20YTB
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SPDR TEC SEL
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SPDR UTL SEL
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XLV
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AAPL
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