Walk The Line

Traders are glued to the charts as the S&P 500 tests the crucial January low. Is it time to start buying?

John Roque, Senior Technical Analyst and Managing Director of Natixis Bleichroeder joins the panel for this conversation. Following is a synopsis of his main points.

Chart: S&P 500 2 year

The charts suggest that the S&P will go lower, explains Roque. I expect well break lower than 1270 Friday or Monday.


Chart: Commodities Index vs. S&P 500, 1956-2008, with 3-year moving average.

Conventional wisdom suggests that commodities are in a "bubble" right now, says Roque, but I don’t think that’s the case. It looks to me as if the commodities surge is in its infancy. The commodities-outperforming-stocks relationship is far below its long-term average. In fact, it hasn't been at the average for more than 20 years.


Chart:AMEX Pharmaceutical Index, 1995-2008, with 40-week moving average.

Editorial: While the stocks that make up this index might be considered "growth," "safe," or "cheap," the index continues to look weak on a technical basis, says Roque. I’m bearish.


Chart: Energy as a Percentage of the S&P 500, 1977-2008.

Analysis: Investors should emphasize energy in their portfolios, counsels Roque. We've been making this case for 4 years now. I think energy will eventually be worth more than the financial sector in the S&P 500.


The bottom line: The S&P could break down to 1236. Also look to buy commodities on any pull back, counsels Roque.

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Trader disclosure: On Mar. 6, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Macke Owns (INTC), (YHOO); Najarian Owns (AAPL), (BIIB), (C), (CSCO), (MS), (NOK), (MSFT); Najarian Owns (USB) Puts; Najarian Owns (YHOO) And (YHOO) Calls, (COP) Calls, (IDCC) Calls; Finerman Owns (GS); Finerman's Firm Owns (AAPL), (AEO), (FNM), (GE), (DSW), (MSFT), (PLCE), (SKS), (VCLK), (WMT), (YHOO), (RAI); Finerman's Firm Is Short (IJR), (IYR), (IWM), (MDY), (SPY); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; GE Is The Parent Company Of CNBC; Charles Schwab Is A Sponsor Of "Fast Money"