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Pro Traders Navigate Conflicting Market Messages

Again investors were perplexed by the conflicting market messages on Monday with stocks making strong advances early in the session only to pare gains by mid-day. ”Something is going on and nobody is quite sure what,” says JJ Kinahan.

For a tell the Fast traders think the thing to watch is the Vix.

”With the Vix between 40 and 50 and staying there you have to have the caution flags out,” Kinahan says.

The question becomes what lies behind the moves? The Fast gang thinks investors need to monitor three fundamental issues 1) weakness in banks, 2) concerns about economic growth and 3) expectations from Jackson Hole.

Following are insights from the Fast Money traders:

Fed Speak

Looking at scheduled comments from Ben Bernanke coming on Friday, Fast trader Steve Grasso tells us, “I don’t think investors expect anything big, but the market is pricing in something."

Grasso just doesn’t see how the Fed can implement any sweeping new programs with the political will ebbing in DC.

And he cautions that any kind of bounce from so-called QE3 could be short lived. QE2 didn’t work so well, so no matter what the Fed says, ” the markets may not react well, either way,” he adds.

Global Growth

Looking at concerns about the global economy, trader Zach Karabell thinks they’re overblown. He just doesn’t think the world is that bad. “I don’t think the economic issues will be as serious as the market is pricing,” he says.

And Karabell expects global growth to trump near-term weakness in the US and Europe. As a result he’s expecting “upward leadership (in the S&P) to come from industrials and technology -- the global plays.”

Although he wouldn't buy right now, his bias is to "get longer down the road."

Bank Weakness

Then there’s the financials.

"The ground zero of all worries is financials," explains Charlie Smith, chief investment officer at Fort Pitt Capital Group in a Reuters interview.

And looking at the market action, investors do not see value in banks stocks, in fact they hammered the XLF as the rally fizzled Monday.

”There are far too many clouds domestically and in Europe for banks to rally,” says Fast trader JJ Kinahan. “And we just can’t go up without the financials going up."

”We don’t need financials to lead a rally but we do need them to stabilize,” adds Fast trader Pete Najarian, before the market can make any serious advance.

Technicals

With such wide ranging fundamentals influencing the market, trader Steve Grasso thinks technicals matter above all else.

“1101 is the last line of support in the S&P,” he says. “Guys really want to see that tested. It’s really squishy below that level, and it needs to hold before investors can feel really good about buying into the market.”

JJ Kinahan agrees entirely. "I think we test it, too," he says.

And if you're looking for a trading thesis Grasso says, "There's still too much global uncertainty. Bounces remain a sell."


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OIL SPIKE

The traders were also keeping a close eye on the oil trade after tensions in the Middle East escalated over the week-end.

How should you position now?

Find out from Tres Knippa owner of Lotus Brokerage. Watch the video now!


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Trader disclosure: On August 22, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell own (AAPL)’ Karabell own (FDX); Karabell own (GS); Karabell own (GOOG); Karabell own (JPM); Najarian owns (AAPL); Najarian owns (C); Najarian owns (HPQ); Najarian owns (MS); Najarian owns (SLV) calls; Najarian owns (GLD) calls; Najarian owns (DIS) calls; Najarian owns (SBUX) calls; Najarian owns (DLTR) calls

For Zach Karabell
Rivertwice Capital is short (SAFM)
Rivertwice Capital is short (SPY)
Rivertwice Capital is short (QQQ)
Rivertwice Capital is short (XLF)


Kevin Hunt
** No Disclosures

Tres Knippa
** No Disclosures

Thomas Wadewitz
Thomas Wadewitz is responsible for the preparation of this report on (FDX) and receives compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

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