Set Up for September - Time to Add Risk
With the Dow up by triple digits on Monday and the market gaining about 7% in a week, is it time to add risk to your portfolio.
In a word, ‘yes’ – says Oppenheimer chief market technician Carter Worth.
Before you go on a shopping spree, it's important to understand that Worth's thesis is a trading thesis - and that its pegged to his belief that both the highs and lows for the year are in. “Does the July 22nd to August 2nd plunge set the low for the year – by all accounts I think it does,” he says in a live interview. In other words, Worth thinks 1100 is the bottom.
Now, why long?
Because at current levels Worth thinks there’s more upside than downside. “The bounce we’re seeing now has been too short-lived. It has more to go. I’m looking at 1250,” he says.
And, what's the trade?
Worth says, rather than look at what to play – he thinks the trade is what not to own.
”I think the things not to own are consumer staples,” he says. “The safe haven of staples is no longer necessary and that sector should underperform in the days and weeks ahead,” Worth explains.
Therefore - 1) on the belief that the market's bounce has been too short-lived and 2) that the market broadly will shun defensive positions, Worth suggests gaming it longSPY and short the XLP.
And Worth thinks fundamentals line-up too. “The market should start to find that maybe things aren’t quite as bad as what’s currently priced in.”
Trader Stephen Weiss isn't buying. “I like consumer staples,” he says. “You participate in the gains but you won’t get as hurt if the market tumbles.” Weiss is admittedly still skeptical that gains can hold. “But I’m starting to warm-up,” he adds.
Trader Steve Grasso is also cautious. The technicals worry him. “There’s little support below 1101,” Grasso says. “If we break below that level we could really fall down another 90 or so handles. I’m a little hesitant to call a bottom.”
And Weiss adds that September and October are historically a treacherous time for investors.
Worth, however, isn’t phased. “The tendency is, if you have a great wash out (or sell-off) the season itself isn’t as bad as the presumption. In other words, I think we could have a decent September,” Worth says.
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Trader disclosure: On August 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell owns (AAPL); Karabell owns (BAC); Karabell owns (GS); Karabell owns (GOOG); Karabell owns (MON); Karabell owns (XRT); Weiss Owns (AAPL); Weiss Owns (AGU); Weiss Owns (JPM); Weiss Owns (QCOM); Weiss Owns (VZ); Weiss Owns (DE); Weiss Owns (NIHD); Weiss Owns (COP); Weiss Owns (DVN); Weiss Owns (TWM); Weiss Owns (SDS); Weiss Owns (AAPL); Weiss Owns (AGU); Weiss Owns (JPM); Weiss Owns (QCOM); Weiss Owns (VZ); Weiss Owns (DE); Weiss Owns (NIHD); Weiss Owns (COP); Weiss Owns (DVN); Weiss Owns (TWM); Weiss Owns (SDS)
For Zach Karabell
RiverTwice Capital owns (MON)
RiverTwice Capital is short (XLF)
For Carter Worth
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For Brian Kelly
Accounts managed by Brian Kelly Capital own
Accounts managed by Brian Kelly Capital own (MON)
Accounts managed by Brian Kelly Capital own (MOS)
Accounts managed by Brian Kelly Capital own (JJG)
Accounts managed by Brian Kelly Capital are long the euro
Accounts managed by Brian Kelly Capital are short (FXF)
Accounts managed by Brian Kelly Capital are short (JJC)
Accounts managed by Brian Kelly Capital are short (SLV)
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