Stocks shook off early losses Wednesday and closed in positive territory, largely propelled by energy shares, which moved upward as the spot price of crude surged higher.
The bulls made their move after a report from the government showed the nation's oil inventory fell by more than 8 million barrels in the past week; a supply increase was expected. Investors interpreted the draw as an indication of an improving economy.
What’s the word on the Street?
We’ve begun to see contango coming out of the market, says Joe Terranova. I think this was a big day in oil. Inventories are getting worked off. I think demand is coming back.
But if gasoline starts to get above $3.50 it could eat into the recovery, counters Dennis Gartman, author of the Gartman Letter. I’d watch the price of gasoline closely as a proxy for consumer spending.
The other part of the story here is that there’s money on the sidelines – a lot of money – and it keeps coming in when the market turns lower, says Karen Finerman. It prevents the market from sliding too far. I have to admit because of this phenomenon on pullbacks I’m a buyer of stocks.
Personally, I think the market moves sideways for a while making it a great stock pickers market, adds Tim Seymour.
I think market strength has to do with the large amount of put protection out there, adds Pete Najarian. It gives investors confidence.
CHINA STOCKS BRIEFLY HIT BEAR MARKET TERRITORY
The climb higher in the Dow and S&P comes in sharp contrast to China’s market which sold-off again due to fears that fundamentals don’t support valuations. In fact the Shanghai index is down 20% from its peak of early August with some analysts saying it’s landed squarely in bear market territory.
However other analysts refuse to make that call until they see if China holds the next key level of support at the 125-day moving average which is 2,703. The index has held above that moving average since early February.
What must you know?
Widely followed economist David Rosenberg has said, China’s Shanghai index has proven to be a leading indicator for the rest of the globe...it led the way down last Fall and led the upturn last November.
But it’s also worth noting that 60% of China’s market is driven by retail investors, adds Fast Money host Melissa Lee.
Beware Shanghai Index
* Approx. 60% Retail Investors
* 849 Stocks...But Top 10 Make Up 44%
* Volume Down 30% During Last Month's Selloff
The Fast Money desk cautions investors that Shanghai may not be quite the anticipatory market as is so widely believed. Be careful not to pay too much attention to this index, counsels strategic investor Dennis Gartman.
PHARMA BOOSTS STOCKS
Shares of Merck closed higher after a judge upheld the patent on its drug Singulair, dealing a blow to Teva Pharmaceutical which wanted to introduce a generic copy.
And only a few days ago Schering-Plough, which is being acquired by Merck, said U.S. regulators had approved its Saphris antipsychotic drug, adding a potential blockbuster product to its pipeline.
What’s the health care trade?
Biotech has underperformed for the entire month of August, says Joe Terranova. I like the XBI with a stop out at $49.75. And I’m watching Pfizer , he adds. If it gets above $16.70 it will get interesting.
Also, as the idea of a public health care option seems to fade, stocks in the space tend to move higher, adds Karen Finerman.
OPTIONS ACTION: TRADERS BET ON AG
Pete Najarian has spotted unusual options activity in Potash .
A large volume of calls traded suggests to Najarian this stock could make a significant move higher.
HAPPY 5TH ANNIVERSARY GOOGLE
Five years ago today, investors went gaga for Google . In one of the most anticipated IPOs over the past decade, the Internet search company priced nearly 20 million shares at $85 per share, raising $1.7 billion dollars through an auction of its shares.
On November 7, 2007, Google hit its current all-time high of $747.24, peaking 779% above its $85 offering price! However since then shares have slid and are currently trading at .
Is Google still a good investment.
According to Citi analyst Mark Mahaney it is. We have a buy on Google with a $580 price target, he tells Fast Money.
He’s bullish on the search innovation happening at the company and adds that demand for Internet advertising appears to be picking up.
Google By The Numbers
IPO Price $85
All-Time Low $95.96
All-Time High $747.24
Up 424% from IPO price
Google Vs. The World: Change since 9/19/04
Google (UP) 424%
Nasdaq (UP) 12%
S&P 500 (DOWN) 6%
Dow (DOWN) 5%
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Trader disclosure: On Aug 19th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares; Finerman's Firm Owns (MSFT), (TGT), (WMT), (HPQ), (SYK); Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY), (USO); Terranova Owns (AMZN), (MSFT); Terranova Is Short (AVB); Seymour Owns (AAPL), (AA), (BAC), (UNG), (POT); Seygem Asset Management Owns (YGE); Seygem Asset Management Is Short (FXI); Najarian Owns (BAC); Najarian Owns (C) Calls; Najarian Owns (CIEN) Calls; Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls’ Najarian Owns (HPQ) Calls; Najarian Owns (INTC); Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (UBS) Calls’ Najarian Owns (YHOO) Call Spread; Najarian Owns (POT) Call Spread; Najarian ;wns (PALM) Calls
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE)
Virtus Diversifier PHOLIO Owns (DBC)
Virtus Diversifier PHOLIO Owns (DBV)
Virtus Investment Partners Owns More Than 1% Of (ABD)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (CLB)
For Dennis Gartman
CIBC Gartman Index Owns Copper
For Mark Mahaney
Citigroup Global Markets Or Affiliates Received Non-Investment Banking Compensation From (GOOG) In Past 12 Months
(GOOG) Has Been A Non-Investment Banking Client Of Citigroup Global Markets In Past 12 Months
Citigroup Global Markets Is A Market Maker In (GOOG)
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