Pro Trader: Greece, Weiner Overshadow Serious Market Trouble

Sell the rally. So says, Stephen Weiss, 'Fast Money' trader and partner at Short Hills Capital.

The fundamentals are not good. So separate the technicals—sentiment—from fundamentals. Market was oversold and short positions, fear index , climbed too high, setting up the indices for a bounce.

The reality coming out this week is that ex-Greece, the market absorbed a lot of poor U.S. economic news, with nearly every release indicating a slowing economy. Was this already discounted in the market, or ignored as global macro issues took center stage?

NYSE Trader
NYSE Trader

I say overshadowed, as investors went to the most sensational story and since Anthony Weiner was not a market event, it became Greece.

The rally won't last, since uncertainty for the economy is still the dominant issue. The market will continue to trade lower, as this earnings season will not have the same positive tone as the last one.

Big down days will be rare, while the market averages just drip lower. Pain in the global economy, no U.S. job growth and then, inevitably, QE3. This has to happen or the Fed will fail in its mandate, despite the jawboning in Washington.

The austerity measures in Europe, which include all the PIIGS, will continue to weigh on materials and industrials. China, which I noted earlier in the week, scored a pyrrhic victory with strong industrial production data—despite trying to slow its economy—will get more aggressive with tightening measures. Five such measures have done nothing to damp inflation or growth.

I still don’t see how anyone can claim that China is engineering a soft landing—its leaders have failed in their mandate with inflation running so hot; the jury is still out on their economic expertise. And, despite no discernible slowing in its economy, commodity prices have declined. This begs the questions as to what will happen when they really do engineer a slowdown? Look out below!

The Chinese government historically has been a great trader and this time won’t be different. They have enough commodity inventories, as we have seen with copper stockpiles, without pulling a page from Fed Chairman Ben Bernanke’s handbook by propping up metals in a weakening environment. Don’t you think they know they are the buyers of last resort?

Crude definitely looks like it wants to revisit the mid-'80s (WTI) and Brent could print par. I maintain energy positions for the long term, as global demand growth remains strong, but am short USO .

Stay away from hard commodities—short steel STLD lowered guidance—and buy beaten up tech and high-yielding equities. Short engineering and construction. Own defensive stocks and quality bank shares—sentiment can’t get any worse.

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

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