The Fast Money traders are closely watching the action in the S&P 500 after the major market index turned negative for the first time this year.
How should you be trading?
The short-term momentum has flipped from bullish to bearish and that’s the first sign of a top, explains Bill Strazzullo of Bell Curve. Now I’d be watching for a second sign.
If you go back to the March lows the biggest accumulation of long positions takes place around 1090. If we close below 1080 take it as another signal that we’ve put in a top, Strazzullo says.
I think the question investors should ask is, 'is this the beginning of a deep dive or is it another shallow correction?' I see it as the latter. That makes this a buying opportunity for high quality names on the pullback, counters Joe Terranova.
If you have a longer time frame I agree with Joe, echoes Jeff Tomasulo of SMB. The market has been resilient time and again. But as a trader I think it's important to recognize the pattern has changed.
I would also still be long the market, counters Brian Stutland of Stutland Equities but I’d also be a buyer of protection.
BANK ON BANKS?
The banking sector led the market lower on Friday after new proposals by the White House to prevent another Wall Street crisis left investors nervous about financials about whether changes in oversight would translate into reduced profits.
Should you buy the dip?
If you’re looking for a trade, I’m staying long JPMorgan , says Joe Terranova. I added to my position on Thursday. And I’m long BofA . But I’m selling regional banks against it. And I’d also avoid capital markets plays such as Morgan Stanley and Goldman .
Looking at the financials the XLF can’t break above 15, muses Bill Strazzullo. That's a big problem for the sector as a whole. And it says something about the broader market. The financials have outperformed for most of the rally and now they are underperforming. I think that makes it much harder for the broader market to go much higher from here.
COMMODITIES CONTINUE DOWNWARD PATH
Commodities traded lower on Friday as investors grew more worried about China’s decision to put the brakes on growth.
As you may know, last week China ordered banks to curb lending through the end of the month. But economists say it won’t be enough. It’s probably only a matter of time before Beijing tightens monetary policy by raising interest rates.
Meanwhile, Goldman Sachs downgraded the U.S. metals and steel sectors to "neutral" from "attractive," saying China's credit tightening may further weigh on the group. Also Goldman removed US Steel from its Conviction Buy list.
What’s the trade?
I’m cautious, explains Brian Kelly. I know it might seem enticing to buy the dip but I’d resist. I think there are better buying opportunities to come.
I’m taking the other side of the trade. I’m a buyer of commodities, says Joe Terranova
TAKE YOUR POSITION: APPLE'S WEEK COMING UP
Next week all eyes will be on Apple . The company reports earnings on Monday after the bell. Apple is expected to report earnings of $2.06 a share on revenue of $12.05 billion, according to Thomson Reuters I/B/E/S, with a gross margin of 35.7 percent.
But Wall Street is really waiting for Wednesday, when Apple could unveil a new tablet computer that investors hope will be as huge a phenomenon as its iconic iPod and iPhone.
The week could provide a pair of long-term catalysts for Apple's stock. But the company's shares often sell off right after major launches after months of rumor fuel big expectations.
What’s the trade?
I think the play is Qualcomm on the news it’s their chip that might go into the new Apple tablet, says Brian Stutland.
I also like Qualcomm, reminds Joe Terranova.
Don’t forget that pattern this season has been that even if earnings were strong, the stock has sold-off, adds Jeff Tomasulo. Remember that.
FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE
BUY HAL? With oil giant Halliburton on deck to report earnings on Monday, should you buy?
I’m not a buyer into earnings, says Joe Terranova, but I do believe in the Halliburton story.
BUY DOLLAR? The dollar slipped on Friday; buy the dip?
I’d sell the euro versus the dollar, says Bill Strazzullo. I think we see more dollar strength.
BUY UNH? Shares of UnitedHealth traded higher after being added to Goldman's Conviction Buy List; should you get in?
I am a buyer, says Brian Stutland.
BUY AKS? With AK Steel on deck to report Monday morning, how do you play the name today?
If the stock can hold above $20 I’m a buyer, says Jeff Tomasulo. But it’s not an earnings play.
CALL THE CLOSE
Joe Terranova: I’m taking the other side of the trade. I’m a buyer of commodities.
Bill Strazzullo: I’m a seller at 1120. I’d cover at 1100. And then I’d watch the action at 1090 as a critical level.
Brian Stutland : I’m a buyer if the market dips to 1100.
Jeff Tomasulo: I’m a seller.
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Trader disclosure: On January 22nd, 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), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (CLF) Call Spread; Najarian Owns (GS) Call Spread;; Najarian Owns (INTC) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (XLF) Calls; Najarian Owns (TEVA); Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (FXI); Seymour Owns (INTC); Seymour Owns (INFY); Seymour Owns (SBUX); Terranova Is Short (CMA), (ESS), (CAL); Terranova Owns (BAC), (JPM), (XOM), (FTO), (FCX), (EMC), (AAPL), (DELL), (MSFT), (QCOM); Terranova Owns March Copper Futures
GE Is The Parent Company Of CNBC
For Tim Seymour
Seygem Asset Management Is Short (PBR)
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 (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (SKT)
For Brian Stutland
Stutland's Firm Is A Market Maker In VIX Options & Futures, Is Short Volatility
Stutland's Firm Is A Market Maker In S&P 500 Options, Is Long Volatility|
Stutland Owns (EMC)
Stutland Is Short (SPY)
For Brian Kelly
Kanundrum Capital Owns (BAC)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (ACH)
Kanundrum Capital Owns (GE)
Kanundrum Capital Owns (CNI)
Kanundrum Capital Owns (EWA)
Kanundrum Capital Owns (EWC)
Kanundrum Capital Is Short U.S. Dollars Against Short Euro, Yen, Swiss Francs
Kanundrum Capital Is Long British Pounds Against Short Dollars
Kanundrum Capital Is Long April Gold
Kanundrum Capital Is Short (GS)
Kanundrum Capital Is Short (EWY)
For Peter Schiff
Schiff Owns Gold
Schff Is Short U.S. Dollar
Other Relevant Disclosures:
Seymour Owned (GOOG) On 1/21/10
Terranova Was Short Feb. Crude Oil Futures On 1/11/10
Najarian Owned (HUM) Call Spread On 1/14/10, 1/15/10
Najarian Owned (CLF) On 1/5/10
CNBC.com with wires