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Halftime: Does S&P Bounce Signal Bottom of a Range?

Tuesday, 7 Jun 2011 | 1:43 PM ET

On Tuesday, chatter on the trading floor had everything to do with the market’s bounce and whether the S&P had found support.

For the first time in days, investors were willing to shrug off the recent raft of weaker-than-expected economic data and hit the buy button. With the S&P touching its lowest level in 2 months earlier this week, bargain hunters may have found some stocks too hard to resist.

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Bank stocks, the worst performing sector of 2011, was among the biggest gainers with Bank of America notably stronger after hitting a 2-year low on Monday.

Considering the S&P 500 has fallen nearly 5 percent since its bull market high at the start of May, has the market found the bottom of its range? Or will the correction continue?

Instant Insights with the Fast Money traders

If you’re involved in the market, trader Joe Terranova says the question to ask yourself is simple: Is the market slowing down or melting down?

For a ‘tell’ he suggests keeping a close eye on the Russell. “If you want an indication of how deep the correction will be – look at small caps,” he says. That’s because these smaller companies tend to be highly sensitive to the economy. "They’ve led the market lower, and they're leading the market back up on Tuesday. "The price action, that's your lead," he says. In other words, Terranova thinks the turn higher on Tuesday could be meaningful and a potential signal that stocks have found a bottom, at least in the short-term.

Terranova is also cautiously bullish because he thinks the dollar “remains in its structural downtrend – fundamentally I see no reason for it to change,” he says. That should be bullish for commodities as well as the broad market because lately the dollar and S&P have been moving inversely.

Trader Steve Cortes isn’t nearly as optimistic. He thinks the market is making a temporary pause but expects selling to "continue and persist."

Longer term he disagrees with Terranova and expects the dollar to get stronger for a slew of reasons including the end of QE and a growing call for austerity in Washington DC. Combined with the weak economic data and “the scope of selling we’ve seen over the last couple of weeks, Tuesday’s gains are not consequential,” he says.

Fast Money friend Peter Boockvar is in the same camp as Cortes. "We did get oversold and we're probably due for this bounce, but I don't think it's anything more than a bounce in a continued downtrend," he says in a Reuters interview.

And it's worth noting that all the Fast Money traders agree that the biggest catalyst that could determine if the S&P has made a near term bottom will come from comments made by Ben Bernanke who will deliver a planned address Tuesday afternoon at the International Monetary Conference in Atlanta.

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GOLD SITS OUT THE RALLY

Elsewhere in the market, the traders were keeping an eye on gold which steadied but did not rally significantly on Tuesday, despite declines in the dollar.

Gold tends to have an inverse relationship to the dollar, because it becomes cheaper for holders of other currencies when the greenback get weaker and it is sometimes bought as an alternative asset.

What should you make of it?

Brian Kelly thinks the relative weakness is simply profit taking. “But if it continues for another day or so I’d grow concerned,” he says

Steve Cortes just doesn’t see any reason for gold or any of the precious metals to rally significantly because they’re largely used as a hedge against inflation and Cortes doesn’t see any serious inflationary pressure.

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BREAKING NEWS FORD

In breaking news CNBC reporter Phil LeBeau tells the desk Ford will be paying down $2.3 billion in term loans and paying off an $800 million revolving credit line; two more examples, he says, of Ford’s aggressive steps to reduce debt.

What’s the trade?

Joe Terranova thinks the move is a sign that Ford is cleaning up the balance sheet so the company can make aggressive moves in Asia. “I think (Ford stock) will be slow and methodical rise,” he says.

Brian Kelly thinks the move is good but adds “there are also a lot of headwinds in the space. I just don’t see any catalysts in the auto industry.”

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BERNANKE PREVIEW

All eyes will be on Ben Bernanke this afternoon as the Fed chief takes to the stage at the International Monetary Conference in Atlanta. Investors will be watching for hints of a possible QE3 in the works.

What should you expect?

Find out from Marc Chandler. the global head of currency strategy from Brown Brothers Harriman. Watch the video now!

Ford Pays Down $2.3B Debt
CNBC's Phil LeBeau reports Ford will pay down $2.3 billion in term loans and reduce other debt; Marc Chandler, BBH discusses the effectiveness of QE2, and the Fast Money traders weigh in on which trades to play today.





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Trader disclosure: On June 6, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Cortes owns (GOOG). Steve Cortes is short (BIDU). Steve Cortes is short Nikkei. Steve Cortes is short Australian dollars. Steve Cortes is short silver. Steve Cortes is short EUR. Patty Edwards is long canadian dollar FXC. Patty Edwards is long (XLK). Joe Terranova owns (XOM), (KSS), (CVI), (OXY), (TM), (BJ), (DIS), (PFE), (V), (HPQ), (FLX), (JPM), (MCD), (PEP), (VRTS). Joe Terranova is short (DELL).

Patty Edwards
Edwards owns (INTC) for clients
Edwards owns (AAPL) for clients
Edwards owns (GLD) for clients
Edwards owns (SPY) for clients
Edwards owns (MSFT) for clients
Edwards owns (GOOG) for clients
Edwards owns (SLV) for clients
Edwards owns (XLB) for clients
Edwards owns (ACI) for clients
Edwards owns (CBI) for clients

Brian Kelly
Accounts Managed by Brian Kelly Capital own (GLD)
Accounts Managed by Brian Kelly Capital own (SLV)
Accounts Managed by Brian Kelly Capital own (IWM) puts
Accounts Managed by Brian Kelly Capital own new zealand dollar
Accounts Managed by Brian Kelly Capital own swedisk krona
Accounts Managed by Brian Kelly Capital own canadian dollars

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 (CSWI)
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)

Urs Dur
Lazard Freres & Co. LLC has received compensation for investment banking services from (NMM) and (STNG) within the past twelve 12 months.
Lazard Capital Markets LLC has acted as manager or co-manager of a securities offering on behalf of (NMM) and (STNG) within the past twelve 12 months.


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