On Tuesday, chatter on the floor was all about the sharp gains in the stock market despite continuing economic headwinds and the fits of Mother Nature!
New home sales slipped for the third month in a row while a rare earthquake rocked the floor of the New York Stock Exchange, but neither event could shake the bulls.
By the close, the Dow had advanced by triple digits with the S&P and Nasdaq also making sharp gains.
Over the last several weeks, market action has been volatile with stocks bouncing between gains and losses as investors attempt to get ahead of the next big move.
Chatter on the floor suggests the next catalyst will come from comments Ben Bernanke makes when he speaks at a central bank conference on Friday in Jackson Hole, Wyoming.
How should you position now?
Instant Insights with the Fast Money traders
Joe Terranova thinks the price action in Tuesday's market is trying to tell you something. "Sit up and take notice," he says. “S&P gains were strong and gold made a meaningful reversal."
In the short-term, Terranova thinks the path of least resistance is higher.
The market’s rally in the face of dismal economic news (as well as the earthquake) suggests ”sensitivity to bad news is becoming less,” he explains.
“If you’re short and bearish, I’d buy upside protection,” he counsels. That's not to say Terranova is blindly bullish, he's not. If you follow him into the market, he suggests "1122 in the S&P as a point of reference stop.”
Brian Kelly isn’t quite as bullish. “I can see wanting to participate but I think this is a massive bear market rally. Bear market rallies can last for 10%. “ Kelly says if you also want to participate, have a tight stop, only play good valuation names and be nimble in case the market sells the Bernanke news on Friday.
The other traders aren’t buying.
Tim Seymour thinks the move is just another headfake. “We’ve seen the story, before,” he says. “If the world is in such great shape why is business confidence in Germany at 3-years low.”
Karen Finerman agrees that the current rally could be short lived. “I would not buy because you think Bernanke is going to bail out the market on Friday,” she counsels.
Stephen Weiss is perhaps most bearish. The market moves scares me,” he says. He’s worried that Tuesday’s gains were a Bernanke bounce and if the Fed chairman does not deliver on Friday, investors could be very disappointed and the sell-off could be very serious.
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Trader disclosure: On Aug 23rd 2011, 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 (BAC); Finerman owns (BAC) ; Finerman owns (AAPL) ; Finerman owns (MSFT) ; Finerman owns (JPM) ; Finerman owns (FS); Finerman owns (FL)
; Terranova owns (VRTS) ; Terranova owns (CAT) ; Terranova owns (OXY); Terranova owns (CVI) ; Terranova owns (DAR) ; Terranova owns (AXP) ; Terranova owns (EMC) ; Terranova owns (ORCL) ; Terranova owns (WFM) ; Terranova owns (AMZN) ; Terranova owns (JPM) ; Terranova owns (FCX) ; Terranova owns (WFC) ; Terranova owns (AAPL) ; Terranova owns (IBM) ; Terranova owns (XOM); Kelly owns (JJC) ; Kelly owns (SLV) ; Kelly owns Euro; Weiss owns (JPM) ; Weiss owns (BTU) ; Weiss owns (NIHD) ; Weiss owns (UGL) ; Weiss owns (COP) ; Weiss owns (DVN) ; Weiss owns (QCOM) ; Weiss owns (NS) ; Weiss owns (ETP) ; Weiss owns (EUO)
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Kass owns (GLD)
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