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Halftime: Warning Signs In Crude?

Caution prevailed on Wall Street Tuesday, one day after the S&P broke through a key technical level to close at a 4-month high.

Again investors are questioning whether the bulls are just getting started or if this the end of the line?

Fast Money trader Steve Cortes is closely watching the action in crude as his market tell and what he sees looks rather bearish.

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Specifically, I’m watching the action in crude versus the Emerging Markets ETF, explains Steve Cortes of Veracruz. They used to trade in lockstep but lately they’ve diverged with crude badly lagging risk markets.

Emerging markets are either producers of crude, places like Brazil & Mexico or they’re the marginal consumers of crude, places like India and China. With the strength in the EEM I'd expect crude to trade well, too but it's not.

To me the divergence suggests the gains in the Emerging Markets are too exuberant, concludes Cortes. I’m short crude and largely bearish all commodities. I think the action is a sign that China's domestic economy is starting to stall out.

Emerging markets have certainly had a run this year, adds Brian Kelly and I’m also concerned about China in the short-term. They have an inflation problem. Wages are increasing and money supply is increasing. At some point they will have to deal with that. If China slows down crude will likely go lower. I also want to be short crude but I’d play it short via the OIH as well as the RSX.


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On a related note, OptionMonster Jon Najarian has spotted some unusual options action in the energy sector. Specifically he’s spotted some heavy call buying in Plains Exploration, with over 12,500 calls trading hands in just the first 15 minutes of the session. That suggests options investors are betting this stock makes a sharp move higher.

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POLL OF THE DAY

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TRADING FINANCIALS

Financials presented a mixed bag on Fed day with Bank of America and Goldman Sachs among the best performers.

What’s the trade?

We need to see more lending for banks to really start to rally, says Karen Finerman.

I’m short the XLF , says Steve Cortes. I think rallies in this sector are meant to be sold. And looking at BofA I think it has a lot of problems against $14.

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TECH PROFIT TAKING

Tech stocks struggled on Tuesday after 9 days of gains - with Amazon and Apple just off their 52-week highs.

What’s the trade?

Amazon is probably a pet stock but I don’t think it’s an investment, says Patty Edwards.

When I look at Apple I see more of a consumer products company than a tech company, says Karen Fineramn. In fact, it's probably the premiere consumer products company out there. And it's not even trading at a crazy consumer products multiple.

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HOUSING

The Homebuilders ETF traded in the green after new data showed housing starts jumped a more-than-expected 11% percent to the highest level since April.

What’s the trade?

Looking behind the numbers, multi-family numbers were up but single family starts were down, says Brian Kelly. I don’t think the data was as great as the market is making it out to be.

The only trade I like in this space is Plum Creek Timber, says Patty Edwards and that’s for the dividend yield.

I’m watching stocks such as Vulcan Materials, Cemex , and Weyerhaeuser , says Steve Cortes. They’ve really lagged the rally in homebuilders. It suggests to me that rally in homebuilding was probably short-covering.






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Trader disclosure: On September 21st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman owns (GOOG); Finerman’s firm owns (BAC); Finerman’s firm owns (JPM); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM);’ Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Cortes is short (XLF); Cortes is long the S&P 500; Cortes is short Crude Oil; Cortes is long U.S. Treasuries; Cortes is short (RSX); Cortes is short the British Pound

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (CSCO) for clients
Edwards owns (EMC) for clients
Edwards owns (FCX) for clients
Edwards owns (GOOG) for clients
Edwards owns (HPQ) for clients
Edwards owns (IBM) for clients
Edwards owns (JPM) for clients
Edwards owns (MS) for clients
Edwards owns (NRG) for clients
Edwards owns (ORCL) for clients
Edwards owns (SYT) for clients
Edwards owns (WFMI) for clients

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 (ORI)
Accounts managed by Kanundrum Capital own (RGR)
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (POT) calls
Accounts managed by Kanundrum Capital own Swiss Francs
Accounts managed by Kanundrum Capital are short Euros
Accounts managed by Kanundrum Capital are short (BCS)
Accounts managed by Kanundrum Capital are short (IAI)
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (OIH)
Accounts managed by Kanundrum Capital are short (BA)
Accounts managed by Kanundrum Capital are short Mexican Peso
Accounts managed by Kanundrum Capital are short U.K. Pound

For Joe Lavorgna
***No disclosures***




CNBC.com with wires.

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AMZN
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BAC
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CEME
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EEM
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GS
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PCL
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POLXF
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RSX
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VMC
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WY
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SPDR SP HB
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SPDR FIN SEL
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SPDR TEC SEL
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AAPL
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MV OIL SVCS
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