'Fast Money' Recap: A Harsh Reality

NEW YORK (TheStreet) -- The markets finally suffered a harsh day of trading due to the government shutdown.

On CNBC's "Fast Money" TV show, Brian Kelly said he's short S&P 500 futures and is targeting 1,620. He added that market fear was evident from the one-month Treasury bond yields, which hit their highest level since 2008.

Dan Nathan said investors are pulling out of this year's big winners and moving into quality stocks including Cisco Systems ( CSCO), Qualcomm ( QCOM) and General Electric ( GE).

Guy Adami wants to see how strong the rally is when there is resolution in Washington and is concerned by the selloff in high-beta stocks.

Karen Finerman said Tuesday's selloff has her slightly more concerned, but is looking at names including Live Nation Entertainment ( LYV) and Hertz Global Holdings ( HTZ) on a deeper pullback.

J.C. Parets was a guest on the show and said the S&P 500 broke below its 50-day moving average and could work its way lower to 1,625. He added that the lower highs showed less participation from investors, and it concerns him that the market couldn't rally from the FOMC meeting in September. He says the June lows of 1,560 have to hold for the market to continue higher.

Kelly says traders could short LinkedIn ( LNKD) and use $240 as a stop-loss and look to re-short if that level holds.

Adami thinks around $200 the stock becomes interesting on the long side and that $240 should be resistance.

Mike Khouw said LinkedIn was interesting because of its extreme overvaluation. He suggested the decline could continue based on the weekly expiration options activity.

Kelly said Amazon ( AMZN) could continue to decline $10 to $15 more, before becoming interesting on the long side -- assuming the overall markets are holding up.

Kansas City Southern ( KSU) reports earnings on Oct. 18. Kelly says to avoid it while Adami suggests traders wait until afterward earnings before buying.

Nuance Communications ( NUAN) was the first stock on the show's "Pops & Drops" segment. Finerman said it seems like investors are disappointed Carl Icahn isn't doing more aside from getting two seats on the board.

TripAdvisor ( TRIP) fell 5% and Adami attributed it to the selloff in Priceline.com ( PCLN). He said investors should wait before buying.

Masco ( MAS) fell 5%. Khouw says there could be downside to $18.

United States Natural Gas ETF ( UNG) popped 2%. Kelly continues to like it but suggested those looking to get long wait for a pulback.

International Business Machine ( IBM) dropped 2%. Nathan says he's long via call options because a lot of bad news seems to be factored into the stock.

Adami says Boulder Brands ( BDBD) is volatile but could be an M&A target. Kelly added that investors who want to own the stock should use $15 as their stop.

Yum! Brands ( YUM) missed earnings estimates and Nathan cautioned traders to let the stock settle for a few days. It should find support in the mid-$60s.

Puerto Rican debt continues to climb, now estimated to be near $70 billion, which is rather large considering the country's size. Alexandra Lebenthal was a guest on the show and said that most of the issuers are rated near "junk" status and fund managers have been selling their positions in Puerto Rico bonds. The bonds are exempt from federal and state taxes, which is one of their key selling points and the reason why over 75% of U.S. municipal bond funds have exposure to them.

Kelly said bond tapering by the Federal Reserve is now off the table until mid-2014, and he would short the iShares 20+ Year Treasury Bond ETF ( TLT) if there's weakness caused by the FOMC meeting.

Costco Wholesale ( COST) reports earnings Wednesday morning and Nathan thinks investors should listen to what management says about the U.S. consumer.

For their final trades, Kelly is a buyer of Valero Energy ( VLO), Khouw said to buy McKesson ( MCK) via calls, and Nathan is a buyer of the October expiration $185 calls for International Business Machine. Finerman is selling out-the-money SPDR S&P 500 Trust ETF ( SPY) puts against her long at-the-money SPY put position. Adami is a buyer of Church & Dwight ( CHD).

-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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