Investors are closely watching the action in the S&P on Tuesday as stocks wind down what looks to be the worst August in a decade.
But what a disconnect! The latest data appears bullish.
Consumer confidence rose more than expected in August, home prices rose more than expected in June and though slowing, business activity also remains on the rise.
What should you make of it?
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I’d take a contrarian stand; I think stocks are a buy here, says Steve Cortes of Veracruz. Not only is consumer confidence higher in the US it’s also higher in Europe. I think consumers are feeling better than Wall Street. But I also think the Street's starting team is away on summer break. When they come back next week, I expect that we'll see them put money to work in equities.
I’m watching moves in commodities, says Pete Najarian, and the metals names. Recent strength in Freeport McMoRan and Souther Copper could be a bullish 'tell'. I think these moves signal increased demand for copper.
(Copper is sometimes called "Dr. Copper" due to its ability to diagnose the state of the economy as well as the ebb and flow of the equity markets.)
Don't forget that historically September and October are tough times for the market, reminds Scott Nations. I’m seeing a lot of call buying in gold, which I take it as a stock market put or bet lower. The consumer is whistling past the growth graveyard and I'm a seller.
What do you think? We want to know!
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GOLD HOPPING
Gold appears set to end August at its highest for two months on Tuesday after a raft of soft economic data lifted its appeal as a haven.
"People are fearful enough of what else is going on in the economy and that is sufficient to justify what is going on in gold," explains Peter Hillyard of ANZ in a Reuters interview.
"It's a bit of a continuation of what is going on in other markets with month-end and I think $1,300 is on the cards... as soon as September," he adds.
What’s the gold trade?
I’m seeing call buying in December at the 1500 strike, says Joe Terranova. That suggests market participants expect gold to make a sharp move higher. They seem to want to own gold. Personally, I think gold is going to $1300 in the near-term.
I’m watching the Gold Miners ETF , counsels Pete Najarian. They've had a big run. Recent options action suggested big investors expected this ETF to go to $55 and that's about where we are now.
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GOV’T BONDS GET BID AGAIN
August has been the biggest month for the 10-year Treasury since the end of 2008.
What’s the takeaway?
It’s also been a strong month of corporate bonds, reminds Joe Terranova.
* Fast Money executive producer John Melloy writes about this trend at length in his daily blog. Click here to go to Bond Bubble Inflating Faster Than Dotcom
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AG TAKES HIT AFTER GREAT AUGUST
With bumper crops and surging prices, American agriculture has had a great August. But ag name Monsanto traded lower on Tuesday due to lowered guidance for the rest of 2010.
What’s the trade?
Monsanto hasn’t performed well lately but I think it’s a company-specific issue stemming from their Round-Up business, muses Pete Najarian. The rest of the fertilizer names are on fire.
I don’t like Monsanto either, adds Joe Terranova. I’d play the ag space with Potash, Agrium or Mosaic .
Or, as a second derivative play, look at the rails such as CNI, adds Najarian. They transport the commodities.
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AUGUST PAINFUL MONTH FOR CRUDE
Crude oil broke below $74 on Tuesday after a bit of a bounce last week. August has been painful for crude, shedding 7% this month.
What’s the trade?
I still like crude, says Steve Cortes. I’d fade the crowd and buy.
I’d play energy with large integrated names, counsels Joe Terranova.
I don’t like crude or related plays at all, counters Scott Nations. If you must play the space I’d do it with nat gas but simply because I think it's oversold.
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WHAT’S WRONG WITH TECH?
Research In Motion proved to be a drag for the tech sector on Tuesday after Bernstein cut their price target on the stock from $55 to $40.
What’s the tech trade?
I’ve noticed a great deal of put buying in RIM, explains Pete Najarian. That suggests big investors agree with Bernstein that the stock could go lower.
I think RIM could be the next Palm, speculates Scott Nations.
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TOYOTA VS THE YEN
The Japanese government is mulling its options over how to curb the sharp rise in the yen and the management of Toyota couldn’t be happier.
Toyota loses/gains about $350 million for every 1 figure move in Japan’s currency, so a recovery to 90 or so in the dollar/yen cross would add about $2 billion in profits to Toyota’s bottom line.
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Trader disclosure: On August 31st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes is long (FCX), (BHP), (SFD), (BMO), (TD); Cortes is long Crude Oil; Terranova Owns (AXP), (GS), (IBM), (QCOM), (AAPL), (GOOG), (BRCM), (TER), (MSFT), (C), (MRVL), (BMO), (V), (POT), (OXY), (GLD), (SU), (FCX), (APA), (XBI)
For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
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Scott Nations
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CNBC.com with wires.