Halftime Pt. 1: Position For A September Snap Back?
What a way to start September; a month that’s historically the worst of the year.
Both the Dow and S&P shot higher as investors scrambled to buy stocks, especially those that lagged in August. Take a look:
August Sept 1
Financials -8% +3%
Industrials -7% +4%
Technology -7% +3%
Investors feared missing a sharp rally after China's manufacturing sector staged a rebound in August and data showed Australia's economy grew at the fastest pace in three years in the second quarter.
But perhaps most bullish, instead of an expected decline in the ISM number here in the US, the data showed factory output increased.
How should you position now?
Instant Insights with the Fast Money Traders
Clearly the PMI number drove the gains on Wednesday, but I think it’s short covering, says Brian Kelly of Kanundrum. Underneath the headline PMI, construction spending was down more than expected. I don’t think we’ve hit a bottom. I would not buy stocks now.
I agree that it’s a short covering rally, says Jared Levy of Peak6. There are still plenty of negative catalysts; the consumer is saving more than they ever have; they’re putting money away. And I don’t care that housing has turned, it’s still very hard to get a loan. Also the ADP Report stunk. I think the market moves lower after this rally.
I’m a seller of the rips and a buyer of the dips, says Pete Najarian. That makes me a seller on Wednesday. I don't think the market can break higher until after Labor Day.
I think August was the bottom for the market, counters Steve Cortes of Veracruz. I believe that for a number of reasons: there’s too much pessimism on Wall Street, consumer confidence rose both in the US and overseas, we’re finally getting some good news on housing, and the potential for so much M&A has to be making the shorts nervous. Those are all reasons to be constructive.
CHART OF THE DAY: A U.S. RAILROAD A PLAY ON CHINA?
This chart also makes Steve Cortes bullish.
I’m focused on UNP, which has tranded in tandem with the XLE until recently. The pattern suggests energy is currently under bid. I’m a buyer of resources because I believe they catch up.
TOPPING THE TAPE: TECH
Looking at technology, investors didn't just bid Apple higher on Wednesday ahead of the mystery event; Intel and Cisco also surged on heavy volume today, after a very rough August.
What's the tech trade?
I like technology, says Steve Cortes and I’m a buyer of laggards such as Cisco, Intel and Apple.
I would not be a buyer of Apple, counters Jared Levy. I think it pulls back after the mystery event. If you want to play Apple I’d do it with options. I’d sell the October 240-230 put spread but wait for a pull back.
TRADING NOW: AUTO SALES
The traders are closely watching the action in the auto sector with the new sales data hitting the tape. According to the latest numbers from General Motors - sales were down 25% as compared to last August. (Don't forget the Cash for Clunkers program was in place, then.)
However there were a few bright spots, Buick sales rose 66 percent over August of last year, while Cadillac sales jumped 83 percent, led by the new SRX crossover. Chevrolet, though, dropped 22 percent.
Meanwhile, Ford says its sales dipped 11 percent as compared to last year.
What’s the trade?
I think the trend is that high end is selling, says Brian Kelly. And we're seeing that broadly. However I wouldn’t buy the auto space here.
I’m a buyer of Ford around $11, says Jon Najarian. I think it could run toward $15.
UNUSUAL ACTIVITY: SAKS
Jared Levy of Peak 6 has spotted unusual options action in Saks .
I’m seeing strangle selling, he tells the desk. That suggests traders believe the stock has both a floor and a ceiling; in this stock its between $6 and $9 / share.
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Trader disclosure: On September 1st, 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 is long Crude Oil; Cortes is long (FCX); Cortes is long (BHP); Cortes is long (SFD); Cortes is long (BMO); Cortes is long (TD); Cortes is long the Euro; Jon Najarian owns (AAPL); Jon Najarian owns (RIMM) calls; Jon Najarian owns (CRUS) and (CRUS) calls; Jon Najarian owns (AKS); Jon Najarian owns (NFLX) short calls; Jon Najarian owns (AMZN) short calls; Levy owns (AGU); Levy owns (SPX)
For Brian Kelly
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (XBI)
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own (POT)
Accounts managed by Kanundrum Capital own (TBT)
Accounts managed by Kanundrum Capital own (RAX)
Accounts managed by Kanundrum Capital own (SGG)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (IAI)
Accounts managed by Kanundrum Capital is short (MCO)
Accounts managed by Kanundrum Capital is short the Mexican Peso
For Mike Abramsky:
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CNBC.com with wires.