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Pros: Rotation from Bonds into Stocks to Drive S&P?

In an attempt to position ahead of a potential major market move, on Monday the Fast gang was trying to determine if investors would embrace more risk as the quarter draws to a close.

Fast trader Karen Finerman thinks they will.

She expects money to come out of bonds and into equities – as money managers rebalance their portfolios.

”That could generate a big move,” she says. However, she largely attributes the rotation to end of quarter window dressing – that is practice in which money managers buy additional shares of their winning stocks into quarter’s end, in an attempt to improve the appearance of their quarterly statements sent to clients.

As a result Finerman is looking for the S&P to make gains – however only over the next 3 days ahead of June 30th, the end of the quarter.

Joe Terranova takes the thesis a step further. He thinks window dressing could generate positive momentum that follows through into July.

“ISM, the jobs number, global PMIs and earnings season” could generate catalysts that drive money out of bonds and back into the stock market, he says.

Trader Stephen Weiss concedes that the scenario makes sense. “With the S&P trading around 13 times, money managers may think the stock market is cheap,” he says.

However, Weiss isn't necessarily betting on more gains. He also says that just because stocks are cheap doesn’t necessarily mean buyers will step in.

Tim Seymour is also cautious. Although he expects some window dressing into month’s end, he doesn't think it will off set “the Greece austerity vote coming Thursday and the fact that commodities are weak,” two major reasons to be skeptical.

Over the next day or so Guy Adami thinks the path of least resistance is probably higher – but beyond that he thinks the market is range bound.

Adami expects the S&P to bounce within a 50 point range until exogenous events play out a little more. “I can’t be bullish without a close above 1300 and I can’t be bearish without a close below 1249," he says

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FINANCIAL RALLY

Financials led the S&P 500 higher on Tuesday after investors got some clarity on capital requirements. But is Basel III really enough to get excited about banks?

What’s the trade?

Guy Adami concedes that these developments eliminate one headwind, however he reminds that many others remain. If you’re looking for a trade, in the space he suggests looking at Morgan Stanley, “which seems to hold 22.”

In financials Karen Finerman still likes BofA. “I agree with Dick Bovethat BofA is undervalued but, so far, long BofA has not been the right move,” she says.

If you want to put money to work in this space, Joe Terranova suggests looking north to either TD or BMO.

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END OF QE2 TO DRIVE MONEY OUT OF BONDS


With June 30th marking the end of QE2, what can bond investors expect for the balance of the year?

Find out from PIMCO market strategist Tony Crescenzi. Watch the video now!





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Trader disclosure: On June 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour owns (BAC); Tim Seymour owns (AAPL); Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Adami owns (INTC); Terranova Owns (VRTS); Terranova Owns (IBM); Terranova Owns (FCX); Terranova Owns (CVI); Terranova Owns (F); Terranova Owns (AAPL); Terranova Owns (CAT); Terranova Owns (BX); Terranova Owns (HPQ); Terranova Owns (MA); Terranova Owns (PEP); Terranova Owns (MCD); Terranova Owns (JWN); Terranova Owns (TM); Terranova Owns (LULU); Terranova Owns (WFM); Terranova Owns (DAR); Terranova Owns (BJ); Terranova Owns (HAS); Terrnaova owns (DIS); Terranova Owns (XOM); Terranova Is Short (DELL); Finerman's Firm And Finerman Own (AAPL); Finerman's Firm Owns (BAC) Leap, Finerman owns (BAC); Finerman's Firm Owns (JPM) Leap, Finerman owns (JPM); Finerman's Firm owns (CMI), Finnerman is short (CMI); Finerman's firm owns (CAT) calls; Finerman's Firm Is Short (SPY); Finerman's Firm Is Long S&P 500 Puts; Finerman's Firm Is Long Russell 2000 Puts; Weiss owns (TWM); Weiss owns (DE); Weiss owns (CMA); Weiss owns (KEY); Weiss owns (QCOM); Weiss owns (NAV); Weiss owns (EMC); Weiss owns (MSFT); Weiss owns (HK); Weiss owns (COP); Weiss owns (AKAM); Weiss owns (ETP); Weiss owns (NS); Weiss owns (VZ)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd.
Virtus Investment Partners Owns More Than 1% Of (DBV)
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Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & URL PLC

Nick Pope
**No Disclosures

Mark Papa
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Tony Crescenzi
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