Wall Street was so tense on Tuesday, if it were a rubber band it would have snapped.
Investors were closely watching the action in the Dow, which slipped below the key psychological 11,000 level in the morning before bouncing higher -- as well as the S&P, which appeared ready to dip back into its trading range only to later turn green.
Investors were at odds over what to make of the action.
Are we looking at a healthy consolidation ahead of the next leg higher or a bearish reversal?
Seems like a good time to look at the charts with Jeff deGraaf, Institutional Investor's top ranked technical analyst for the sixth year in a row. Not only did he reveal his outlook for the S&P, but also gold and grains.
OUTLOOK: S&P
deGraaf told us that patterns in the chart of the S&P suggest that “we’re due for a consolidation but it’s not a big deal.”
Looking at the technicals he explains that “90% of issues are trading above their 50-day average and that’s happening in a neutral trend. Overbought conditions in neutral trends tend to work.”
We know that’s confusing so we asked him to bottom line it. He told us “I think it’s a 3% correction at worst. The market just wants to bide some time.”
OUTLOOK: GOLD
Despite the massive gains in gold and the prevailing bullish sentiment in the space, deGraaf does not think the precious metal is overhyped.
”When there’s a high number of bulls in gold, the returns in both the short term and long term are pretty good,” he says. “I think it’s a pretty good bet.”
In fact, when looking at the charts he doesn’t see a ceiling. “Technically gold doesn’t have a resistance,” he says. There’s nothing ahead of us that stands in the way. That’s because gold may be becoming the international standard for a stable currency.
OUTLOOK: CORN
Correlations are running very high among assets, deGraaf explains. So as gold and precious metals climb so do grains.
And despite the sharp gains in corn as well as soybeans, wheat and cotton - they all still look very good, he says. Most have nice long-term bases.
In the short term, corn is bumping up against resistance – the high from 2 or 3 years back - but longer term he thinks it could break out.
SALESFORCE.COM
Salesforce is one of the many high flying tech stocks that investors hammered recently.
deGraff tells us, that in any stock where you have “long-term relative strength and short term weakness, these stocks tend to outperform over the next 4-13 weeks.”
Fast Money trader Joe Terranova agrees with all the calls listed above. "I think what deGraaf has done is identify confidence in each one of those charts."
Terranova recommends getting behind that confidence. "It's ok to buy high and sell a little higher," he counsels.
----------
TAKE YOUR POSITION: BIG EARNINGS
Earnings season is about to kick into high gear with big reports from tech, banks, conglomerates and more. Just take a look at some of the heavy hitters releasing results.
Tuesday: Intel, CSX
Wednesday: JPMorgan
Thursday: AMD, Google
Friday: GE, Mattel
How should you position?
- TAKE YOUR POSITION INTEL
Intel reports earnings on Tuesday after the bell. How should you game it?
I’m an owner, says Patty Edwards but I’m not sure that at the end of the day, I’ll still be holding this stock.
- TAKE YOUR POSITION: CSX
Railroad name CSX also reports after the bell and will likely set the tone for the rest of the sector. How should you game it?
If you own CSX essentially you’re betting on coal, explains Steve Cortes. The coal ETF appears challenged so I’d take profits in CSX.
- TAKE YOUR POSITION: JPMORGAN
JPMorgan reports ahead of the bell Wednesday, the first of the big banks to offer a read on the financials. How should you trade?
I’d be long JPMorgan going into earnings, says Brian Kelly. I think the bar has been lowered so significantly that now the surprise is to the upside.
----------
CALL THE CLOSE
Joe Terranova: I’ll be watching Intel to see if inventories are building.
Brian Kelly: I’m a buyer of the market if we get a positive surprise from the FOMC.
Patty Edwards: I’d stay stock specific; I like Akamai.
Steve Cortes: I’m a buyer of the dollar on a belief the minutes show the Fed is exercising fiscal restraint.
______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment, but not have it published on our Web site, send those e-mails to fastmoney@cnbc.com.
Trader disclosure: On October 12th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (APA), (AAPL), (IBM), (OXY), (RSH), (UPL), (XBI), (JOYG), (C), (AXP), (SWN), (AGU), (EOG), (HES), (OIH), (ORCL), (SU), (VRTS), (FTO), (RIG), (PEP), (POT), (CRM), (CF), (VMW); Terranova Owns (TBT) Calls; Terranova Owns (FFIV) Puts; Terranova Owns (FCX) Put Spread; Terranova Owns (JOYG) Put Spread; Terranova Owns (GLD) Puts; Cortes is short (XLF); Cortes is short (BAC); Cortes is short (BIDU); Cortes is short Euro; Cortes is short Crude Oil; Cortes is short Gold
For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLF)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)
For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (GPRE)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (SGG)
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 (AGM)
Accounts managed by Kanundrum Capital own (MSFT)
Accounts managed by Kanundrum Capital own (FRO)
Accounts managed by Kanundrum Capital own (GLGC)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (UUP)
Accounts managed by Kanundrum Capital are short (HYG)
Accounts managed by Kanundrum Capital are short (SLF)
Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso
For Patty Edwards
Edwards Owns (GLD) For Clients
Edwards Owns (PGM) For Clients
Edwards Owns (SPY) For Clients
Edwards Owns (QQQQ) For Clients
Edwards Owns (SH) For Clients
Edwards Owns (VXX) For Clients
Edwards Owns (SBUX) For Clients
Edwards Owns (INTC) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (GE) For Clients
Edwards Owns (JPM) For Clients
For David Rosenberg
***No Disclosures***
For Jeff deGraaf
***No Disclosures***
CNBC.com with wires.
