'Fast Money' Recap: Market Crossroads

NEW YORK (TheStreet) -- The markets closed flat Monday despite encouraging housing sales data.

The Dow Jones Industrial Average was down 1.44, or 0.01%, to 12,981.51. The S&P 500 was up 1.85, or 0.14%, to 1397. The Nasdaq was up 2.41, or 0.08%, to 2966.16.

Melissa Lee, the moderator of CNBC's "Fast Money" TV show, asked the trading panel to comment on the direction of the market.

Dan Nathan sensed caution among options traders as reflected today in the demand for downside puts, especially in the index ETFs.

Guy Adami said the price action shows a market that refuses to sell off at lower levels and is making a push to the May 2008 highs at 1425.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

Anthony Scaramucci was worried about the chances of a near-term correction. He pointed out that the market is up 25% since October while only 44% of the companies in the earnings season have outperformed consensus estimates. He said he is concerned about the impact of higher gasoline prices on the economy.

Karen Finerman said she wouldn't be surprised if the markets took a breather, including Apple (AAPL).

Lee shifted the discussion to Priceline (PCLN), which hit a new 52-week high as it blew past first-quarter guidance estimates.

Despite its lofty price, Adami said the valuation makes sense. He said the stock trades at 20 times forward earnings. He said Priceline's fourth-quarter bookings are up 52% and its first quarter revenue forecast ranges from 22% to 27%.

Aaron Kessler, an analyst with Raymond James who has a price target of $685 on the stock, said Priceline has done a good job of penetrating Europe, where 25% of the hotels are online. He said Priceline continues to grow, taking market share away from offline travel agencies and package tour operators.

Lee noted a report that pending home sales are at their highest levels since April 2011. Finerman said it's further evidence that the housing industry is bouncing on the bottom and that the bottom is in for the homebuilder stocks. Although she believes the housing market will recover, she said she is not jumping in at this point.

The panel noted that ancillary stocks like Whirlpool (WHR), up 6.31% today, and Tempur-pedic (TPX), which hit a new high, have been on a sharp rise.

How have hedge funds fared this year? Scaramucci said they have lagged behind a bullish market that has raced up 25% in three months. He said it's been a difficult time for hedge funds and predicted a period of consolidation for them this year.

He said the trades that worked so far for the hedge funds are the reflation trades with a bias toward the euro crisis abating. He also said the funds are into credit sensitive mortgage-backed seucrities and distressed equities.

Lee brought in Carter Worth, a chartologist with Oppenheimer Asset Management, to comment on the stall in small-cap stocks. He said the iShares Russell 2000 Index Fund (IWM) is not rolling over and that the stall is a reasonable pause given the recent rise.

He said the same analysis could be applied to the financial stocks, which he said are in the early stages of a bearish-bullish reversal.

In the Money in Motion trade, Rebecca Patterson, chief market strategist for JPMorgan Asset Management, down played a S&P downgrade in the long-term debt ratings in Greece because of collection action clauses in certain debt agreeements. She said most peope knew it was going to happen.

She said the consensus view is that second round of LTRO would be $500 billion, but she said she did not know what means. What is certain, she added, is that the ECB, along with other central banks, have been taking steps to dramatically increase liquidity, a good sign for cyclical assets.

Her currency trade against an equities pullback called for going long the U.S. dollar and short the Swedish krona.

In the takeover battle for surf retailer Billabong, Finerman said she feels that TPG Capital will probably ante up its bid after Billibong rejected its $3-a-share offer.

With Warren Buffet buying JPMorgan (JPM), is it still time to buy ahead of its investor day on Tuesday.

Jamie Cox, an analyst with Harris Financial, said he would be eagerly awaiting what CEO Jamie Dimon has to say about housing because he believes that is the key to the future of banks, along with the stress test results.

Cox said the stock should be held for the dividends and incremental increases over the next few months.

He said JPMorgan would be better off as a single entity rather than broken up. He also said he liked such middle-market bank stocks as PNC Bank (PNC) and Sun Trust (STI) because they benefit from an improving housing market.

In the final trades, Scaramucci liked Microsoft (MSFT). Adami liked Westlake Chemical (WLK). Finerman liked Covidien (COV). Nathan favored a stock replacement strategy for banks.

--Written by David Tong in San Francisco.



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