Ahead of Friday’s all important jobs report, the stock market seemed to be stuck in neutral with investors fretting about fundamentals.
The Fast Money pros, however, were focused on the technicals with the action in S&P raising eyebrows after the major index crossed a key level to the downside.
”The S&P breached a key level at 1311,” explains trader Steve Grasso.
That’s important because 1311.80 was the S&P’s lowest point in May – a level the index touched on the 24th of that month. Traders had thought that level might provide support, at least in the near-term.
If the S&P now closes below 1,311 it could open the window to sharp moves lower. If that happens, “I think we’re heading down to 1295, the April low,” says Grasso.
From there, technical analysis suggests the next down move would take the S&P to its March lows near 1260-1250, also the index's 200-day moving average.
“1257 is flat on year,” says Grasso. “(If we get there) that’s a big deal – that’s put up or shut up time. – If institutions are behind the curve either they get back in or let them fade.”
The usually bearish Guy Adami is a little more optimistic. “Honestly, I think the market is setting up for opportunity. 1300 should be a level of support,” he says. To support his thesis, Adami points to the decline in the Vix, which he takes as a signal that the market doesn’t believe a sharper sell-off is imminent.
Jon Najarian remains fairly bullish. Looking at the action in the Vix, he says “the panic isn’t really there. Nobody is desperate to buy insurance at these somewhat pumped up levels.” He goes on to tell the desk he’ll likely be a buyer on Friday, after the jobs report.
THE RETAIL TRADE
Looking at the market a little more closely, the traders are keeping a close eye on retail, with stores reporting a mixed bag of May same-store sales.
What should you make of it?
Steve Grasso reminds the desk that 70% of all stocks trade with the overall market. "No need to rush into anything right now," he says.
Trader Josh Brown says much the same. "There's no reason to be in these names right now. There may be bounces along the way but the trend is lower."
If you need a retail pick Guy Adami likes Tiffany but a couple percentage points lower.
TICK BY TICK – BANKS
Again the traders are closely watching the financial sector after Moody’s said it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo , citing concerns about the regulatory environment facing the largest U.S. banks.
Meanwhile New York prosecutors have delivered a subpoena to Goldman Sachs seeking information on the investment bank's mortgage and derivatives business. According to published reports, authorities want to know if Goldman put its own interest ahead of their clients' and dumped bad mortgage linked derivatives on counter-parties.
Despite the negative headlines the XLF hasn’t slipped.
What’s the trade?
Steve Grasso is skeptical of the sector. He thinks current strength in Citi and BofA is nothing more than a bounce off an oversold level. And he says Goldman has to close above $136 to be buyable again.
Guy Adami thinks much the same. "There’s no reason to own any banks," he says. "There are serious headwinds. That doesn’t mean you can’t buy for a bounce but I would not establish a position as a long-term investment. Price is truth and the action says banks want to go lower."
UNUSUAL ACTION: GNW
Jon Najarian has spotted unusual options action; a larger than usual volume of buyers in the Genworth June 11 calls.
He thinks the action is tethered to market speculation that billionaire investor David Einhorn has established a position in this name.
CALL TO THE FLOOR
With social networking a hot area of the market, the traders are always looking for the next hot IPO.
And on Thursday’s they were eager to hear from Jive Software – a company whose goal is to bring social networking into the workplace.
What must you know about this firm? Don’t make a move until you check out our interview with CEP Tony Zingale.
Watch the video now!
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Trader disclosure: On June 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by “Fast Money” traders; Grasso owns (AKS); Grasso owns (AMD); Grasso owns (ASTM); Grasso owns (BA)
Grasso owns (BAC); Grasso owns (C); Grasso owns (D); Grasso owns (HOV); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Brown owns (AAPL); Brown owns (GM); Brown owns (JPM); Brown owns (YHOO); Brown owns (QCOM); Brown owns (GLD); Brown owns S&P 500 ETF; Brown owns Nasdaq 100 ETF; Brown owns Russell 2000 ETF; Adami owns (AGU); Adami owns (C); Adami owns (INTC); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE)
Adami owns (BTU)
For Steve Grasso
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 MU
Stuart Frankel & Co and its partners own msft
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 RDC
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 SHORTS (QQQQ)
Stuart Frankel & Co and its partners own (AAPL)
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