With stocks stuck at 1 month lows, investors are starting to worry that serious storm clouds may be gathering over the Street.
BofA-Merrill's Mary Ann Bartels is among the skeptics. She thinks the equity market has begun a correction that could last into October.
She writes, "Since early August, the VIM (volume intensity model) shows rising distribution and falling accumulation. This suggests that sellers are stepping into the market."
And if the S&P 500 were to break 1010, she says, a deeper correction would become a bigger risk, with 950 and even 878 coming into view.
This isn’t the first bearish note from Bartels.
Earlier in the month she wrote that a head and shoulders pattern may be forming in the S&P with “a left shoulder at the January high, the head at the April high, and the right shoulder developing over the summer/fall.”
How should you position now?
Instant Insights with the Fast Money traders
For a tell I'm watching two sectors, says Joe Terranova - technology and financials -- they have not participated in the recent rally, he says. Without them I agree with Mary Bartels - we could challenge those numbers.
However, over the next week and a half we’re going to get a lot of economic data that will make clear just how strong the headwinds are, Terranova adds. In the event the headwinds aren’t as bad as believed I think the market could climb. We may be at an inflection point.
Liquidity is very poor right now and the housing numbers out this week will probably be weak, adds Tim Seymour. Personally, I don't think the macro-data is terrible but I think the market is probably challenged for the next few weeks.
Although I’m also concerned about the market broadly, I believe there are pockets of opportunity in this market, adds Steve Cortes. I like Australia broadly and BHP specifically. Given their willingness to spend $39 billion to acquire Potash I have to believe business has not fallen off a cliff.
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GOLDMAN SACHS FALTERS
Adding to the negative tone, market bellwether Goldman Sachs appears to be on brink of breaking its 50-day moving average.
What should you make of it?
I don’t read a lot into that, says Karen Finerman.
Around $140 I’m a buyer of Goldman, says Joe Terranova, with a stop at $125. If Goldman drops to $125 there are much bigger things to worry about than Goldman.
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H-P WORST PERFORMER HP was the worst performer in the Dow on Monday after the company tried to one-up Dell's takeout bid for 3Par.
According to TechCrunch, HP sent a counter offer to 3Par’s board, proposing that it would buy the company for $1.6 billion in cash — or $24 a share, compared to Dell’s offer of $18 per share.
The deal was approved by HP’s board, and only needs the approval of 3Par’s board to be finalized. Once approved, HP expects the transaction to close by the end of the year.
What must you know?
HP just can’t get out of its own way, muses Karen Finerman. HP lost more value on Monday than the entire value of what they’re paying for 3Par.
*Hear more about developments from CNBC’s John Fortt. Watch the video now!
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TOPPING THE TAPE: AG TRADE
One thing that’s still working in this shaky market...the ag trade. Wheat prices are still rising, not to mention the ongoing Potash saga.
According to the New York Times, Potash is looking for possible counterbids in an effort to thwart a hostile $38.6 billion takeover bid by the mining giant BHP Billiton.
Potash disclosed on Monday that it has had discussions with others, in a statement announcing that its board had unanimously rejected BHP’s unsolicited offer.
The statement said:
PotashCorp has been approached by, and has initiated contact with, a number of third parties who have expressed an interest in considering alternative transactions. Discussions are being pursued with several of these third parties in order to generate value enhancing alternatives.
How should you trade?
I think we’re in the late innings of the stock appreciation in Potash , says Joe Terranova. North of $150 I'm not sure the stock has a lot more upside.
I expect the Australians and Canadians will keep this deal inside their borders, says Tim Seymour.
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BULL MARKET OR BS: TOP STRATEGIST: KEEP BETTING ON RECOVERY
The Dow may have closed lower on Monday but true bulls say there are no down markets, just buying opportunities.
Jason Trennert of Strategas Research Partners says to bet on a recovery. You read that right a recovery.
Find out why. Watch the video now!
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Trader disclosure: On Aug 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BX), (GOOG), (POT); Cortes owns (FCX), (SFD); Cortes owns (BHP); Cortes owns Crude Oil; Cortes is short (SPY); Cortes is short (XLF); Cortes is short Japanese Yen; Cortes is short U.S. Treasuries; Finerman owns (GOOG); Finerman’s Firm owns (HPQ); Finerman’s Firm owns (POT) calls; Finerman’s firm owns (WMT); Finerman owns (MOS); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Terranova owns (AXP), (C), (BMO), (V), (POT), (OXY), (GLD), (FCX), (APA), (SU), (XBI)
For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (XLY)
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Virtus Investment Partners own more than 1% of (IGE)
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Virtus Investment Partners own more than 1% of (YDNT)
For Brian Kelly
Accounts managed by Kanundrum Capital own U.S. Dollars
Accounts managed by Kanundrum Capital own Swiss Franc
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (TBT)
Accounts managed by Kanundrum Capital are short the U.K. Pound
Accounts managed by Kanundrum Capital are short the Peso
Accounts managed by Kanundrum Capital are short (XLF)
Accounts managed by Kanundrum Capital are short (AFL)
Accounts managed by Kanundrum Capital are short (MCO)
Accounts managed by Kanundrum Capital are short (IAI)
Anthony Scaramucci
SkyBridge Capital and Scaramucci own (GD)
Mike Khouw
***No Disclosures***
Jason Trennert
***No Disclosures***
Nishu Sood
Deutsche Bank owns 1% of more than any class of common equity of (TOL)
(TOL) is an investment banking client of Deutsche Bank
Dan Eggers
Credit Suisse provided investment banking services to the subject company (CMS) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (CMS) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (CMS) within the next 3 months.
Credit Suisse provided investment banking services to the subject company (PCG) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (PCG) within the next 3 months.
Credit Suisse provided investment banking services to the subject company (SO) within the past 12 months.
Credit Suisse provided non-investment banking services, which may include sales and trading, to the subject company (SO) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SO) within the next 3 months.
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Credit Suisse provided investment banking services to the subject company (PGN) within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (PGN) within the next 3 months.
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