Pros: Energy Equities to Dictate Market Direction?
On Thursday, the Street was again focused on commodities with investors trying to make heads or tails of the recent moves.
"Commodities have had a great run-in here. We are just going to get some volatility going forward, both in the up direction and down direction," says Wayne Schmidt, chief investment officer at Gradient Investments in a Reuters interview.
Of all the potential ripples, pros are particularly focused on energy equities, which have dictated the tone of the market in recent days. The sector has tumbled 7.9 percent this month after it gained 16.3 percent in the first quarter.
What should you make of it? How should you position now?
Instant Insights with the Fast Money traders
Trader Pete Najarian is cautiously optimistic. “(Although) the market has been dictated by energy equities we’re not seeing devastation in other sectors such as healthcare and tech,” he says.
Also action in the Vix suggests we’re not seeing fear snap back in the market.” Najarian expects those catalyst will ultimately prevail and send stocks higher. “We’re closing higher, volatility is telling you that,” he says.
Tim Seymour thinks the trade is all about the dollar. “We’ve put the lows in on the dollar,” he says, “next it crunches higher." If he’s right, that’s a problem for commodities nominated in dollars because dollar strength makes them more expensive to buyers using other currencies. Although he didn’t say it outright, that could presents headwinds for equities.
Guy Adami suggest putting Freeport McMoRan on the radar as a ‘tell.’ He says, “if it trades north of $50 it might be a reversal to the upside – one of the first positive reversals we’ve seen in a long time. That’s something that’s worth watching.” Looking at the market into the close he says, “I like it here. It’s a nice turn.”
Karen Finerman agrees. Into the close she also likes the market.
Elswhere in the commodities trade, Gina Sanchez, director of asset allocation at Roubini Global Economics tells Fast Money that she’s taken off long positions in commodities and put that money into cash. However, she intends to again establish positions on the thesis that the move lower was due to technicals and not fundamentals. “We expect oil prices to remain high on global demand,” she says, "and would go back in, soon.”
Her only caveat is to watch for signs that global economic activity has been damaged by higher oil. In other words, in oil, will we see a replay of 2008, when the price of oil surged to $147 then plunged? If so, position accordingly.
CALL OF THE DAY: GOLDMAN
Shares of Goldman slid on Thursday after widely followed analyst Dick Bove of Rochdale said the stock is "not a good investment", citing pressure on the justice department to bring a criminal lawsuit against the firm.
What’s the trade?
Guy Adami says, “Goldman has not performed since January and has basically been grinding lower since winter. I think the stock will catch up but I don’t think you can own it, yet.”
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Trader disclosure: On May 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman owns (ESV) and (JPM). Pete Najarian owns (PFE), (MRK), (AAPL), (TCK), (AKAM), (C), (HPQ), (TEVA), (MS), (RSX), (GE), (MSFT), (YHOO), (VLO) and (TER). Pete Najarian is long (RIMM) calls. Pete Najarian is long (AVL) calls. Pete Najarian is long (NTAP) calls. Pete Najarian is long (XLF) calls. Pete Najarian is long (PMCS) calls. Pete Najarian is long (CVS) calls. Pete Najarian is long (XL) calls. Pete Najarian is long (BSX) calls. Pete Najarian is long (HBC) calls. Pete Najarian is long (EWZ) calls. Pete Najarian is long (XLI) calls. Pete Najarian is long (FCX) calls. Guy Adami owns (AGU), (C), (GS), (MSFT), (NUE) and (BTU).
Cooperman Owns (ETFC), (GM), (RIG), (MTG), (TEVA), (CVS) In His Fund
Finerman's Firm owns (M)
Finerman's Firm owns (TGT)
Finerman's Firm owns (WMT)
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