S&P’s Likely Move as Markets Worry about al Qaeda Retaliation

Both the Dow and S&P rose on Monday, after President Obama confirmed that al Qaeda leader Osama bin Laden had been killed in a firefight with US forces.

The knee-jerk trade on Wall Street was sell oil and buy dollars however investors quickly faded both moves as they attempted to better understand what these developments would mean in the days and weeks ahead.

The big question on Wall Street now is whether risk is on or whether it's off.

”Will the fringe elements of al Qaeda view bin Laden’s death as a rallying cry?” asks Fast Money host Melissa Lee. And will that spook investors and generate a flight to safety?

In other words, in the days ahead will bonds, the dollar and gold all catch a bid as investors move money out of stocks?

Instant Insights with the Fast Money traders

Although it’s difficult to find a comparable event historically, the traders look at how the market reacted after Sadam Hussein was captured in 2003.

As you can see from this chart, “Over the next few days and weeks of trading, the market did move higher,” says host Melissa Lee.

If comments made by strategic investor Dennis Gartman prove to be true, it would suggest this is how the market could move again.

Gartman does not expect a sell-off triggered by a flight to safety.

He says “although there may be more attacks, they will be individuals acting on their own. The ability to put together a very sophisticated attack takes time and I doubt they’ve had the time to put anything together.”

That’s not to say he doesn’t worry about the risk of retaliation at all. He does. “Rest assured we'll have them. But they will not be of the size of September 11^th."

The other Fast traders agree. From the floor of the NYSE trader Steve Grasso explains that market pros “don’t think it’s a tradeable entity at this point.” And trader Brian Kelly, adds ”I’m not sure we’re any more in danger or any safer than we were yesterday.” When asked about the market's direction Kelly says, "I like this market."

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SILVER LOSING ITS SHINE

Meanwhile, the Fast Money traders were also watching the action in silver , after the spot price dropped sharply after the CME Group raised the amount of cash that traders must deposit for speculative positions. It's the biggest intra-day drop since October 2008.

What's the trade?

Pete Najarian is closely watching the action in the the ultra-short silver ETF ZSL. "Call activity is picking up," he says. "It may be folks betting that maybe silver is going to pullback."

Trader Steve Grasso also expects a pullback. However, he's ready to "jump back into silver around 42." "The debt ceiling conversation should generate gains in silver as well as gold," he speculates.

Brian Kelly is also bullish. "I think the silver correction is over," he says.

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Trader disclosure: On May 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian Owns (YHOO); Grasso owns (AMD); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (C); Grasso owns (D); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Karabell owns (AAPL); Karabell owns (GOOG); Karabell owns (RIMM); Karabell owns (AGQ); Pete Najarian owns (PFE); Pete Najarian owns (TCK); Pete Najarian owns (AAPL); Pete Najarian owns (AKAM); Pete Najarian owns (C); Pete Najarian owns (HPQ); Pete Najarian owns (TEVA);Pete Najarian owns (MS); Pete Najarian owns (RSX); Pete Najarian owns (GE); Pete Najarian is long (RIMM) calls

For Steve Grasso:
Stuart Frankel & Co and its partners own (AMD)
Stuart Frankel & Co and its partners own (AOL)
Stuart Frankel & Co and its partners own (CSCO)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (MSFT)
Stuart Frankel & Co and its partners own (MU)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UAL)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)
Stuart Frankel & Co and its partners are short (INTC)

For Brian Kelly
Accounts Managed by Brian Kelly Capital own (AMG)
Accounts Managed by Brian Kelly Capital own (ANBTU)
Accounts Managed by Brian Kelly Capital own (DIA)
Accounts Managed by Brian Kelly Capital own (EBAY)
Accounts Managed by Brian Kelly Capital own (GLD)
Accounts Managed by Brian Kelly Capital own (GDXJ)
Accounts Managed by Brian Kelly Capital own (SLV)
Accounts Managed by Brian Kelly Capital own (JJG)
Accounts Managed by Brian Kelly Capital own (LMT)
Accounts Managed by Brian Kelly Capital own (MS)
Accounts Managed by Brian Kelly Capital own (RVBD)
Accounts Managed by Brian Kelly Capital own (TSN)
Accounts Managed by Brian Kelly Capital own (SU)
Accounts Managed by Brian Kelly Capital are long gold
Accounts Managed by Brian Kelly Capital are long wheat
Accounts Managed by Brian Kelly Capital are long soy futures

Zachary Karabell
River Twice Captial is short S&P 500
River Twice Capital is short Nasdaq 100

Dennis Gartman
Funds Managed By Dennis Gartman are long gold
Funds Managed By Dennis Gartman are long silver
Funds Managed By Dennis Gartman are long Brend and WTI crude
Funds Managed By Dennis Gartman are long Canadian Dollar

CNBC.com with wires.