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Top Traders: Your Next Move After Tuesday's 'Scary' Reversal

Tuesday, 9 Nov 2010 | 6:01 PM ET

Stocks and government bonds stumbled Tuesday following a "scary reversal" in the markets at around 1 p.m., where equities, Treasurys, gold and oil fell at the same time — something "Fast Money" trader Joe Terranova said investors never want to see.

"I think you have to be concerned. If that's a glimpse of potentially what could be in the future in 2011 based off a failed Treasury auction, that is clearly problematic," said Terranova, chief market strategist of Virtus Investment Partners. "I'm still long, but I am clearly not as long as I was this morning."

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The market hasn't seen everything reverse in tandem like this since January 1994, said Terranova, recommending that investors pare down positions. He bought puts, protection on commodities.

Watching everything reverse in major volume is also worrisome to Guy Adami, managing partner of Drakon Capital. The market has made some "head moves" lately, where you think it's going down and then it suddenly bounces back. But the difference with Tuesday's market lies in gold and silver, both of which touched highs before paring gains.

Adami said Tuesday's action gives him reason not only to get out of stocks, but maybe get short, too.

Tim Seymour, founder of EmergingMoney.com, thinks the markets succumbed to pressure as investors closely watched the government's $24 billion 10-year Treasury auction. It's the first auction since the Federal Reserve announced last week it would buy $600 billion in bonds in an effort to prop up the US economy.

Investors are also closely watching the 30-year Treasury bond, which will be auctioned Wednesday, Seymour said. With the 30-year, investors see the $4.13 as a technical level in which the market breaks down.

In addition, Seymour thinks there is "nervousness" about the upcoming G-20 summit, where world leaders will meet Thursday and Friday. Many leaders are upset with the Fed's money policies, Seymour explained, and that played into Treasury prices Tuesday.

Whatever the reason, the desk seemed to agree Tuesday was a reversal day. As such, Brian Kelly of Kanundrum Capital bought puts to give himself protection. He remains bullish corn, hogs and cattle, which he said has "real demand."

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Trader disclosure: On November 9, 2010, the day this video was recorded, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova owns (AAPL) puts. Joe Terranova owns (FCX) puts. Joe Terranova owns (APA), (AAPL), (AXP), (C), (DIS), (FCX), (HES), (IBM), (ISRG), (MCD), (NKE), (ORCL), (PCP), (PEP) and (PFE). Guy Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC) and (MSFT). Tim Seymour owns (AAPL), (MOT) and (POT). Steve Cortes owns (TSN) and (K). Steve Cortes is short (PHM), (MAS) and (WY).

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 (CMS)
Virtus Investment Partners own more than 1% of (CSC)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (FCFS)
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 (SOA)
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 (WMB)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)

For Guy Adami:
Adami’s wife works at Merck

BRIAN KELLY
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (TD)
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 (CLF)
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 (HD)
Accounts managed by Kanundrum Capital own (PCL)
Accounts managed by Kanundrum Capital own (XHB)
Accounts managed by Kanundrum Capital own (FCX)
Accounts managed by Kanundrum Capital own (JO)
Accounts managed by Kanundrum Capital own (EWH)
Accounts managed by Kanundrum Capital own (MCP)
Accounts managed by Kanundrum Capital own (MOT)
Accounts managed by Kanundrum Capital own (HBC)
Accounts managed by Kanundrum Capital own (SWC)
Accounts managed by Kanundrum Capital own Euros
Accounts Managed By Kanundrum Capital own (POT) Calls
Accounts managed by Kanundrum Capital are short Japanese Yen

ANTHONY SCARAMUCCI
Scaramucci and SkyBridge Capital own (ADP)

RICHARD VOLPE
***No Disclosures***

COLIN SEBASTIAN
Lazard Capital Markets LLC makes a market in AKAM and NFLX securities

DAVID RIEDEL
***No Disclosures***

SCOTT NATIONS
***No Disclosures***

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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