Move higher, stocks surging with the dow gaining more than 250 points energy, consumer discretionary, industrials all leading the way, this as the yield on the 30year bond hit an alltime low so do you trust todays market rally . Guy adami . Hi, mel no, i definitely dont trust it but i will say this. As we get into the later part of this week, into a holiday weekend, theres an old saying steve knows this on the floor never short a dull market you could see the market flowing through over the next couple of days into early next week. I will say it again. I think it will culminate on the down side when the vix trades up to 30. With that said, there are Trading Opportunities here i will do a power pitch in back end of the show. I thought you were going to do it right now. That is going to speak to exactly that. Yes grasso theres another saying too, dont fight the fed. Never short a dull market, dont fight the fed. You have both coming up right now. Do they cancel each other out . No they might. Actually thats where i was going to go. Really . Oh. Because the fed right now, you dont know which way the fed is going to go so you dont know which way you are fighting so that to me is the caveat to whether the markets are safe to get back in or to stay in right now. But i am invested. I think th you were mentioning earlier on the call of financials, particularly regional banks, Retail Stocks, these are some of the most beaten down sectors of the market. Right so history doesnt rhyme if it repeats itself. I dont know why i said that. Well, because we have seen the moments throughout the last six to twelve months where financials underer formed transports which underperformed for 16 months. What didnt make sense about todays tape today was you had a flight to quality and bonds. We tested the lows in ten years we hit sunday night. We had the dollar rallying a bit. We had other dynamics that would be kind of riskoff trades and yet a huge move in small caps, a huge move in the xrt or the Retail Stocks and the transports i think we have oversold conditions here. I think the reality of, we are trading in a 100 s p range for the last month, thats it. With a fair amount of volatility and a whole lot of anxiety and a lot of people grinding and nashing their teeth and not much has happened i think todays breakout is nothing you say, plant a flag in the ground and say this was the moment, but i do think when you get oversold you get these bounces. You have a chart . I do. Which is a concern to you. What is your cliche i dont know if i have a cliche i have never understood it, but ill use it for this this chart was being passed around i think it has been passed around for a week or so but a trader sent it to me today it basically shows what people will call a megaphone top or broadening top, technical formation. Im not a echnician, not playing one on tv today. Too late. Oh, boy anyway, the point is what you get here is the broadening formations and you usually get five touches on the line what does it show us i found it interesting that it shows us we have effectively been trading in a very broad range with volatility expanding. To me that frightens me because when volatility expands, things break. I think this resolves to the down side. It certainly could go up to the upside we will have somebody talking about it in a minute or so, but to me it is just a picture that visually shows what we talk about every night. Is it the trade war . Is it the fed . Is it this, is it that you have this massive volatility, very difficult to trade and likely things break. Can we put the chart up again . In terms of touching the line, does it have to alternate between highs and lows yes. So theoretically after number five if we can get back up it would go down to number six, which would be the orange line no, five is it. Oh. Fives the number. That is it . Thats all it goes. It breaks after five . But it is a wide range, is that right so the way to interpret this, as im told, is it either breaks violently higher or violently lower. Interesting. My view is we break violently lower, but five is as many touches as you get with the old megaphone top. We used to always say theres no volatility left in the market now we have extreme versions of volatility yes, i think both will be right. I think you could break lower and you could break higher both will probably happen, just which happens first. It is probably higher in my opinion. You still have people reach for chemicals today. When was the last time they bought chemicals im long tsc, packaging. And that makes you feel good about breaking higher . Because they were so beaten up, people were trying to risk out and they were so worried about global growth, now theyre buying the things that they threw out, which makes me potentially set up for a higher market. That would be the glass is half full interpretation of the markets move today. I am always half full brought up on wall street, what can go wrong will go wrong another cliche yours, by the way, is history doesnt repeat itself but it often rides i dont have to be politically correct. It doesnt make sense anyway. Now youre mad. The mets had a tough night last night. Come on what were you saying i think the market over the next couple of days grinds slightly higher. People on the weekend will feel good about themselves, thinking they they figured out what the inverted yield curve moving, and then things will get interesting. I think october will be a historic month for a number of asset classes, specifically the one that bk knows the most about. Everybody made a point thats been emphatic about the conditions here. I would argue that we havent seen anything yet in terms of volatility, even though i think people felt we had a big and i think we traded in a very tight range here despite the divergence of outcomes we could have here. So i hate to do this, but it is a very quiet week. It could explain some of the subdued. We also get violent moves in these types of weeks i think you have a major expectation of rebalance out of bonds into equities at the end of the month. Or it could have happened already. It may have been the bid to the market today. Right. You got the sense, and, therefore, oversold stuff would be a rotation in for relative value players. But as we have echoed and unfortunately had to address almost nightly on the show, theres nothing about the trade war that has changed hong kong is still a tinderbox you have a dynamic with the fed thats still unproven. 50 may be more in the lexicon of where the market is right now except for the fact im listening to a fed which doesnt really sound like to a man they want to go 50. If anything, i still think that thats the most important dynamic for the market. Youre the only one on this desk that thinks the market could break higher what would you buy here in this environment . I would buy the things that have not worked, because today if if todays an indication where you should be going, it is energy and chemicals, the things that havent worked. We know if theres brighter headlines on the trade front, all of those large cap tech names, all of the Semi Conductor space, everything that is, quote, unquote, trade related, will rip higher. But the best bang for your buck are the things that have not performed that start to perform now. All right well, the countdown is officially on apparently tony dwyer says the clock is now ticking. Look at that clock ticking on a recession, and the market peaked 24 months, zero days it is about 19 months of t the. Thats how we calculate. Tony says the market will rally 15 until the recession kicks in he is at the plasma to chart it. Tony. Thanks, mel wall street is filled with strategists that tell you something, it comes on and when it gets there they change. I wont be that guy. I dont think it is different at this time. You will notice the grade, shaded areas are recession what happens every single time prior to a recession, sure enough, you get a yield curve inversion of the 210 this one was a 39 rally prior to recession this one led to this one is 34 rally before the recession and the peak of the market this was 39 , and this was 29 so i think were going to go actually a lot more than 15 i think we will do 15 in the next year, but it actually takes about two years. If you look at the last three cycles, the average gain has been 34 the median gain has been 34 over 22 months how do you know then when is it time . Like these numbers are great who cares about a median how do you know it is time to get really defensive it is time to get defensive when Corporate Credit starts to act poorly what you will see here is prior to the recession you had a bottom in the moodys bwa. This is the lowest level of Investment Grade bonds this is the average yield of the lowest level of Investment Grade bonds. It made a low two years before you went into a recession. We just made a record low. It was a record low. It was the only second time in the history of the moodys bwa since 1962 that it dropped to minus 15 thats not signaling money is shutting down. Money shutting down is what causes a recession lastly, the fed, stunningly, the fed has yet to get really ahead of the market. How do you know when it is ahead of the market . I believe they will, which is one of the reasons i still think the market is going to go up how do you know theyre not ahead of the market . Because this is the current lower bond of the fed funds rate and these are the two and tenyear note yields i dont need to be a master economist, because im not, to know that the fed is behind the market when you are 50 basis points below the fed funds. I think tony comes over what do you think . Yeah. You never ask. Now you ask. Im joking. Come on. We will bring a chair. She does what she wants to. Right. Thank you. Which is what she should do, by the way hi, tony. I brought paperwork. Wow, very prepared. I like the smile. I got to read you something, mel. Youre going to love it. I dont even get i thought you did your little thing at the plasma. Im waiting. Okay. Here is my question. If people believe theres a rule of thumb that you have a certain amount of time after this, you know, indicator flashes a recession signal, doesnt that time the more people know about this lag time, doesnt that time period get compressed . So it is a great question i went back and i read my prior notes because i want to make sure that im not full of it either in all of those prior notes, every time reading your notes, by the way, doesnt make you less full of it. It may be more. Definitely more full of it. But the reason that i did that is to make sure that it isnt different this time, that i was saying the same thing back in the last cycle what creates that lead time is the tenyear note yield dropped so much. We have gone from 3. 75 to the 1 hadnt 4 level thats extraordinarily stimulating because bank lending has not shut down, so theres money moving around and it got cheaper and you are still at full employment. So you have money that kind of surges into the market because the drop in the tenyear and then it kind of shuts down, and the time it takes to put that money to work is what causes that lead time but you get this kind of bump in the economy. So you are like, maybe it is different this time but it is not different this time. In the past times, im curious also, where does that tenyear yield typically drop from and does that make a difference because some could argue that a drop and we have been subtwo for a long time. Thats right. Even though we were more than three november of last year. We have been subtwo for so long that people could say that there was money being borrowed at the very low levels anyway, so every incremental drop in the tenyear doesnt lead to incremental borrowing on the part of corporations, which wont lead to incremental spending later on. It does at the household level, there is no question. Karen has brought this up a lot the last couple of times ive been on. No question industrial spending and corporate spending has come down because of the trade war. Thats not debatable household spending, however, is more sensitive to the drop in rates of theres an idea in the marketplace that the lower risk premium and the global overseas negative yields has created this artificial suppression in the long end, which means that this may not be a good recession indicator. What i brought to read is a quote, if you dont mind, mel. Does she have a choice in. Listen to this for a second. Apparently not. Theres been a good bit of evidence that the decline in the premium and perhaps a great deal of savings chasing a limited number of Investment Opportunities around the world have led to a somewhat permanent flattening or even inversion of the yield curve, and that pattern does not necessarily predict a slowing in the economy or a recession ben bernanke, february 2007. So that quote is saying the global low global Interest Rates is creating demand for the u. S. Product thats artificially suppressing the long end of the curve. We have done this before. It didnt go very well though. It didnt go well it was a much different cycle, but it didnt go well, as you know. Yeah. Im curious, tony if were bgoing to get the rip higher, steve grasso said they were buying chemicals. Is that the place to be . In the earlier segment you were talking about bonds coming down inflation breaks even up to today. I think it was this morning when it became a pervasive story on the street that bill dudley came out with his oped on bloomberg that suggested you dont want to have policy that allows for President Trump to win a second term now, nobody on the set or anywhere knows my political bias thats not my job. But you have a vicechairman of the former vicechairman of the Federal Reserve openly stating that the risk to the market or the risk to the economy is President Trump and you dont want to pursue this policy because it might help him. That right there gave the fed the flexibility to become aggressively accommodative as i have been suggesting lately. Why . Because right now they have to prove theyre not kowtowing to President Trump. Now they have to prove on that oped, they have to prove theyre not biassed against President Trump. They have to prove their independence so you remove both tail risks. What can they follow their own inflation breakeven, which has fiveyear forward inflation at 1. 5 . They want 2 if you dont do anything, how are you going to get 2 if it is at 1. 5 . Thats what i think is going to kickstart this rally that goes towards the peak but a lot of people on the show you know, i have been a perm au bul perma bull i have been bullish for ten years. I said the conversion changes the tone im watching the credit indicators to make sure it is not going side ways. Thanks, tony. The guy is good isnt he good . I was nervous he had another piece of paper hanging on him too. Theres a couple of issues with that the problem is during the other recessions the fed had about five or six Percentage Points to bail the economy out so they dont have that. Im worry about if the market is pricing in something cataclysmic after all of that happens, and you also want to hunt yield. So stick with whats been performing as well so utilities cant ha have a fu leg higher in the economy. I think the fed can cut rates from here to eternity. They will not get the inflation they desire and they think they can somehow manufacture it i think history has proven they can do anything but. Tim, quick . Utilities are up 32 from the beginning of the trade war you tell me what is going to reverse that trend im not sure. Coming up, fox and williamssonoma on the move after hours. We will give you the highlights from the quarters. First, facebooks 2020 vision. The social media giant seeing major money moves ahead of next years election. We will break down who is driving the big spend. Much more fast money right after this along the byway much more much more than this i did it my way announcer verizon is americas most awarded network and the only one with the galaxy note10 5g. Right now, when you buy one, you get a galaxy note10 free. Thats verizon. Thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Welcome back to fast money facebook back in the political spotlight once again ad spending among democratic president ial hopefuls skyrocketing our own Julia Boorstin in los angeles with the spending spree. Hi, melissa despite the manipulation on facebook around the last president ial election, the fact that the platform is offers such a great opportunity to narrowly target voters is once again making it a destination this time for democratic hopefuls the wall street journal reporting that a Political Action committee focused on turning out Asian American voters saw the cost of generating one email address for its supporter or donor list skyrocket to 279 from 9 or less now, it does make sense that the price hikes would be happening now. The deadline to qualify for the next debate is at midnight, and democratic president ial hopefuls have been spending big to reach the donor and polling threshold necessary to be included now, it is not that facebook is trying to take advantage of a surge of interest. Prices are set rather by demand in facebooks auction advertising system facebook did not weigh in on the reported increase in those ad prices, but it did say, quote, our ad auction is designed to promote a diversity of advertisers, not just those that bid more it takes into consideration whether the ad will be interesting and relevant for the person seeing it all of this comes as facebook ramps up its requirements for political advertisers. Now political advertisers have to go beyond just verifying their identity and location. Now they have to provide information about their organization and who is funding their ads, including either their tax id number, a government websit