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Market Pros: Should You Resist or Embrace Pressure to Sell?

Tuesday, 24 May 2011 | 6:43 PM ET

On Tuesday, investors were attempting to gauge just how much selling pressure was coming into the market as the S&P closed at its lowest level in over a month and flirted with a critical level that bears argued will not hold.

Specifically, the S&P 500 ended below its 50-day moving average for a second straight day. According to technical analysis, the 50-day, now at 1,324.59, could turn into a hurdle for the benchmark to reestablish a strong uptrend.

That would suggest it’s time to profit and protect.

However, a note from Goldman Sachs really captured the attention of the Street and worried short sellers. The firm made decidedly bullish calls raising its price forecasts on a slew of commodities including crude oil and industrial metals and they reiterated their positive view on gold.

“We now believe that the risk/ reward once again favors being long commodities," say Goldman analysts. "We are shifting back to a near-to medium-term overweight recommendation.”

And it’s not just Goldman. Morgan Stanley also boosted its oil forecast.

Considering commodities and related sectors drove the market to a new bull high in the first place, are Goldman and Morgan trying to tell us that the sell-off is just about over.

How should you position now?

Silver Leads Commodity Comeback
Oil, copper climb from depths on Goldman call to 'buy," with the Fast Money traders.

Instant Insights with the Fast Money traders

Trader Joe Terranova says “to go with selling pressure is not the right trade.” He thinks investors need to ask themselves a critical question. “Is this a slowdown or a meltdown. I don’t think it’s a meltdown,” he says. Although he concedes that the S&P appears vulnerable he says on any pullback he’s a buyer of energy equities such as Occidental and Apache.

Both Tim Seymour and Guy Adami are far more cautious. “I think the market tests 1295,” Seymour says.

That’s a very critical level; it's the 150-day moving average, something Oppenheimer chief market technician Carter Worth calls the smoothing mechanism. According to Worth, “that’s the line in the sand.” And if the market breaks there, the downside could be substantial.

”The last 3 days the S&P has closed lower with momentum fizzling out late in the session,” adds Adami.. That’s something we haven’t seen in a while and suggests a new dynamic may be gripping the market.

Read More: New Dynamic Gripping Market, Strangling Bulls?

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BANK BUZZ KILL

The traders are keeping an eye on banks stocks, which dragged down the market after Kansas City Fed Chief Thomas Hoenig called for new limits on prop trading and derivatives.

Hoenig said banks’ business should be confined to loans and deposits to avert a recurrence of the federal bailouts and near-collapse of the financial system in 2008.

“The consequence of expanding the safety net to an ever- increasing range of activities is to invite a repeat of our most recent crisis,” Hoenig said in a speech in Philadelphia. “With separation of activities, risks will remain in the financial system, but unlike the past decade, this risk will be priced more correctly and failure can be resolved more equitably.”

How should you trade it?

Joe Terranova suggests Evercore . "On a pullback I’m a buyer," he says. Also he likes Blackstone and KKR.

Tim Seymour is bullish on Goldman. “It remains one of the best names in the space,” he says despite the overhang.

Guy Adami can’t get on board. If the S&P sells-off like he suspects it will, he thinks the banks will be 'taken out to the woodshed.'

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IS GOLDMAN FLIP-FLOPPING

Another thing pro traders were chattering about Tuesday was how quickly Goldman Sachs changed their view on oil. Six weeks ago they said Brent was heading to $105. Today they’re bullish again.

What should you make of it?

Find out from esteemed oil trade Dan Dicker. Watch the video now!

Don't Get in on Oil Yet: Trader
In a note today, Goldman Sachs analysts call for Brent to rise to $120 by year-end, with Daniel Dicker, Independent Oil Trader.










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Trader disclosure: On May 24, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Terranova owns (XOM); Terranova owns (KSS); Terranova owns (CVI); Terranova owns (OXY); Terranova owns (TM) ; Terranova owns (BJ); Terranova owns (DIS); Terranova owns (PFE); Terranova owns (V); Terranova owns (HPQ); Terranova owns (FLX); Terranova owns (JPM); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (VRTS); Terranova is short (DELL); Karabell owns (AAPL); Karabell owns (GOOG)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)|
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & URL PLC
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Zachary Karabell
River Twice Capital is short (SHLD)
River Twice Capital is short (GS)
River Twice Capital is short SPY, QQQ

For Brian Kelly
Accounts Managed By Brian Kelly Capital are long (SLV)
Accounts Managed By Brian Kelly Capital are long (VLO)
Accouts Managed by Brian Kelly Capital are long (TLT) calls
Accounts Managed By Brian Kelly Capital are long (ANDE)
Accounts Managed by Brian Kelly Capital are long (MCP) calls
Accounts Managed By Brian Kelly Capital are long (TLT) Calls
Accounts Managed By Brian Kelly Capital are long Australian Dollars
Accounts Managed by Brian Kelly Capital are long (HOC) calls
Accounts Managed by Brian Kelly Capital are long yen

For Dan Dicker
**No Disclosures

For Colin Gillis
*No Disclosures



CNBC.com and wires

  Price   Change %Change
APA
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BX
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AERT
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GS
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KKR
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OXY
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SPDR FIN SEL
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