Halftime Pt.1: S&P in Grips Of Death Cross?

Talk on the Street Thursday turned to how far the market may fall after stocks suffered their fourth straight day of losses.

The latest economic data didn’t bode well for the bullish camp, home sales plunged a record 30% in May while manufacturing activity fell to its lowest level in 6 months.

But it’s the technicals that are perhaps most gloomy. As you can see below, the S&P is now on the verge of hitting something chart watchers call a death cross – a pattern created when the 200 day moving average crosses the 50-day; it’s another bearish signal.

How should you be positioned?

CNBC

Instant Insights with the Fast Money traders

Looking at the technicals, I think the market is broken, says Guy Adami. Can we rally into the close? Sure. Could there be a rally if Friday’s jobs numbers are better than expected? Perhaps.

But I’m firmly of the belief that every rally should be sold, adds Adami. Ultimately I believe we’re heading down to the low 900’s on the S&P.

Looking at different technicals, the 55-day moving average has already fallen below the 100-day, adds Ashraf Laidi, chief market analyst of CMC Markets. If we close like this at the end of the week it could be bad.

On Tuesday's Halftime Report Carter Worth of Oppenheimer explained that according to his analysis, after breaking 1040 the S&P would likely go down to 980, reminds host Melissa Lee.

It’s true that the data mentioned above and patterns in charts suggest the economic recovery is softening, admits Joe Terranova. No argument there. But do I believe the next 50 to 75 handles are lower? No, I don’t believe that. The currency markets appear to be turning a corner, with the dollar getting weaker; long-term a weak dollar has a macro-bullish impact on the capital market.

-------------

SECOND HALF STORY: EURO

If you’re looking for a bull story check out the action in the euro . Despite bearish news overseas the euro continued higher.

We’re seeing euro strength across the board not just against the dollar explains Ashraf Laidi, chief market analyst of CMC Markets. If the euro can close for the week above 124.80, that could be a bullish sign, he says.

What’s the trade?

I’m now long euro and short dollars, says Brian Kelly. For the next two weeks to a month I think we can see strength in the euro.

As far as I can tell this is a relief rally in the euro, adds Guy Adami. But by Halloween I still expect the euro to trade at parity with the dollar.

* Hear more from Ashraf Laidi. Watch the video now!

-------------

MARKET BUZZKILL: OIL

The traders are keeping a close eye on crude futures which fell sharply on Thursday, largely pressured by concerns about the global recovery.

What’s the trade?

Oil is trading off soft economic numbers and my call on Wednesday to get long oil wasn’t a good one, admits Joe Terranova. Long term I think oil is going up but looking at the tape; this isn’t the time to establish a position.

Right now I think the play in the space is long nat gas, he says. The storage figures were more bullish than anticipated.

-------------

MARKET BUZZKILL: BANKS

The financials experienced heavy selling Thursday however around lunchtime Goldman Sachs traded higher after hitting a 52-week low.

What should you make of it?

I’m an aggressive buyer of Goldman Sachs, reveals Joe Terranova. I know all the bearish news. In the wake of the horrible tape the shares are higher and that’s telling.

Goldman hasn't traded well since October, counters Guy Adami, I wouldn't make too much of the move.

I’m not so certain that I’d want to plunge into the bank sector right now, says Patty Edwards.

If you're wondering whether the move in Goldman should be considered a market barometer, I think the move higher is just a one-off in Goldman, adds Brian Kelly. In other words, I don’t think it’s a referendum for the rest of the market.

-------------

CHINA SLOWDOWN

Two economic indexes show a slowdown in China's manufacturing sector, fueling concerns that the global recovery is faltering.

Will China suffer a hard landing in the second half?

I expect there’s more bad news coming out of China. says David Riedel, president and founder of Riedel Research but the PMI numbers are still expanding and the China story remains strong.

Investors should get a chance to own China stocks cheaper over the next couple of weeks – across the board I’d look to own names 20% lower than where they are today -- but long-term I’m a buyer.

What’s the trade?

I’d look at domestic China companies such as China Mobile and New Oriental Education , says Brian Kelly.

*Check out our entire interview with David Riedel. Watch the video to your left.

______________________________________________________
Got something to to say? Send us an e-mail at [e-mail] and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to [e-mail].

Trader disclosure: On July 1, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova is short gold; Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135 CALLS; Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS)

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) for clients
Edwards owns (BAC) for clients
Edwards owns (BBY) for clients
Edwards owns (C) for clients
Edwards owns (COP) for clients
Edwards owns (CVX) for clients
Edwards owns (DELL) for clients
Edwards owns (DO) for clients
Edwards owns (F) for clients
Edwards owns (GE) for clients
Edwards owns (GLD) for clients
Edwards owns (GOOG) for clients
Edwards owns (GLW) for clients
Edwards owns (HAL) for clients
Edwards owns (HPQ) for clients
Edwards owns (INTC) for clients
Edwards owns (JPM) for clients
Edwards owns (JNK) for clients
Edwards owns (MOS) for clients
Edwards owns (MS) for clients
Edwards owns (MSFT) for clients
Edwards owns (NE) for clients
Edwards owns (NSC) for clients
Edwards owns (NVDA) for clients
Edwards owns (PNC) for clients
Edwards owns (QQQQ) for clients
Edwards owns (RIG) for clients
Edwards owns (SLB) for clients
Edwards owns (SPY) for clients
Edwards owns (STI) for clients
Edwards owns (STM) for clients
Edwards owns (TM) for clients
Edwards owns (TM)
Edwards owns (TSLA) for clients
Edwards owns (TTM) for clients
Edwards owns (TXN) for clients
Edwards owns (UNP) for clients
Edwards owns (VXX) for clients
Edwards owns (VZ) for clients
Edwards owns (WFC) for clients
Edwards owns (WFT) for clients
Edwards owns (XOM) for clients
Edwards owns gold for clients
Edwards owns platinum for clients
Edwards owns silver for clients
Edwards owns the Russell 2000 for clients
Edwards owns the S&P500 for clients


For Brian Kelly
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own (GDX)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SDS)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own Gold
Accounts managed by Kanundrum Capital own Treasuries
Accounts managed by Kanundrum Capital own US Dollars
Accounts managed by Kanundrum Capital is short (AMZN)
Accounts managed by Kanundrum Capital is short (RCL)
Accounts managed by Kanundrum Capital is short (XLY)
Accounts managed by Kanundrum Capital is short (XLE)
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (CME)
Accounts managed by Kanundrum Capital is short (EWA)
Accounts managed by Kanundrum Capital is short (EWI)
Accounts managed by Kanundrum Capital is short (EWO)
Accounts managed by Kanundrum Capital is short (FXI)
Accounts managed by Kanundrum Capital is short (GS)
Accounts managed by Kanundrum Capital is short (HIG)
Accounts managed by Kanundrum Capital is short (RKH)
Accounts managed by Kanundrum Capital is short (RSX)
Accounts managed by Kanundrum Capital is short (USO)
Accounts managed by Kanundrum Capital is short (MCO)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (XLI)
Accounts managed by Kanundrum Capital is short (FCX
Accounts managed by Kanundrum Capital is short (GFI)
Accounts managed by Kanundrum Capital is short (JOYG)
Accounts managed by Kanundrum Capital is short (XLB)
Accounts managed by Kanundrum Capital is short (XLK)

For Joe Terranova:
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

David Riedel
***No Disclosure***

Ashraf Ladhi
***No Disclosure***

Late additions:
Accounts Managed By Kanundrum Capital Are Long Euro, Are Short (BCS), (BUCY)
Edwards Owns (F), (TTM) For Clients


CNBC.com with wires