On Monday, the Dow closed below the psychologically important 10,000 level for the first time since November as investors sold bank shares due to ever growing concerns about the financial troubles in Europe.
Meanwhile, the benchmark S&P 500 is now off about 8% from its 15-month closing peak of Jan. 19th.
Is the rally just recharging or are we about to lose our shirts again?
Strategy Session with the Fast Money traders
Now we know that Friday’s rally was too good to be real, says Guy Adami. We told you Monday needed to confirm Friday's rally and Monday didn't come through. We closed on the lows. The market is behaving badly and it's behaved badly since Intel reported. Good news has triggered bad price action.
Now I’m watching Goldman as my 'tell'. If it closes below $148 I think we go into full bear market mode.
I think Monday’s action confirms that Friday’s rally was due to short covering, muses Pete Najarian. The price action Monday was not good. However it's worth noting that the Vix didn't spike. There's not a lot of fear in the market.
We needed for the S&P 500 to close above 1085 for the bears to walk away and that didn't happen, adds Tim Seymour. Investors are very worried about Europe. Spreads blew out in Turkey. The debt markets are getting worse and worse
Also, redemptions from equity funds continue, adds Gary Kaminsky. Money is just not going into stocks. That’s bearish, too.
I agree that we’re in for much more than a 10% correction, says Dennis Gartman, author of The Gartman Letter. We’re starting to see a downturn in economic activity, which I find disconcerting.
My philosophy for trading is -- understand why something is happening economically and then look at the price action in stocks. If both of them work go trade, if one of them starts to fall apart get out and if both fall apart get short, Gartman says.
However, not every market barometer points to weakness. U.S. lumber futures rose to their highest level in 29 months last week, ahead of the spring building season. Also, Morgan Stanley upgraded Home Depot stock to "overweight" from "equal-weight," saying it's optimistic about the housing market.
40% of US GDP is related to housing, so when I see lumber futures move, it says to me the economy is going to get better, explains Brian Kelly of Kanundrum. And lately lumber futures have been surging.
What do you think? We want to know!
"THE LEADERS OF THE LAST BEAR MARKET ARE AT AGAIN
As we mentioned above, financials led the market lower with Bank of America and Citigroup making noteworthy moves to the downside.
Concerns about the fiscal stability of Greece, Portugal and Spain have rattled global markets over the last two weeks, curbing the appetite for stocks – particularly banks stocks – on fears they may have exposure to the woes.
What’s the trade?
If you need to be in the banking sector I like Santander but I’d stay away from Barclays , counsels Tim Seymour.
I’m bullish Jefferies , adds Guy Adami.
I’m watching the XLF, says Pete Najarian. It can’t trade above $14. That makes me want to stay away from Goldman , JPMorgan and other names.
CALLS OF THE DAY: WONDERS OF THE WEB
BofA added Google to the firm’s “U.S. 1" high conviction list citing the stock as an attractive recovery play.
“Despite recent concerns on the strength of the recovery, which has helped pressure the stock, we believe Google remains an attractive macro-economic recovery plan and funds wanting increasing exposure to a recovery will be incremental buyers,” he writes.
What’s the trade?
The fundamental story looks strong but the charts don’t look so good, says Pete Najarian.
In the space, I’m watching Baidu , says Tim Seymour. I think it moves lower.
Collins Stewart raised Amazon.com to Buy from Hold with a price target of $150 citing Kindle strength.
“In addition to AMZN presenting an attractive entry point after being down 15% from its recent peak, we believe that, though higher competitive risk remains a concern for the Kindle franchise, the Kindle ecosystem is much bigger than what we and [the] Street previously thought,” he writes in a research note
What’s the trade?
I think 113.82 may be support in Amazon, says Guy Adami.
If Amazon stabilizes technically, I think it’s worth a look, says Gary Kaminsky. The stock is no longer over-owned.
* In case you’re wondering Dennis Gartman gave the desk a preview of Tuesday’s Gartman Letter. Tomorrow, he’ll be talking about currencies and how money is moving into Canada, Australia and New Zealand.
Got something to to say? Send us an e-mail at email@example.com 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 firstname.lastname@example.org.
Trader disclosure: On February 8th, 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), (BTU), (GS), (INTC), (NUE), (MSFT); Kaminsky Is Short (LULU); Najarian Owns (AAPL) Call Spread; Najarian Owns (GILD) Call Spread; Najarian Owns (INTC) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (TCK), Is Short (TCK) Calls; Najarian Owns (XLF) Calls; Najarian Owns (CLF) Call Spread
For Dennis Gartman
Funds Managed By Dennis Gartman Are Long Australian Dollars, Canadian Dollars
Funds Managed By Dennis Gartman Are Short British Pound Sterling, Euro,
Funds Managed By Dennis Gartman Own (BWLD), (DRI), (PNRA)
Funds Managed By Dennis Gartman Are Short (MT), (NUE), (PEP)
For Brian Kelly
Kanundrum Capital Owns (HOV)
Kanundrum Capital Owns (PHM)
Kanundrum Capital Owns (TOL)
Kanundrum Capital Owns (WY)
Kanundrum Capital Owns (PCL)
Kanundrum Capital Owns (RYN)
Kelly Owns (HOV) Calls
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short U.S. Dollar
Kelly Owns (FXE) Puts
For Tim Seymour
Seygem Asset Management Owned (MTL) On 2/3/10
Seymour Owns (AAPL)
Seymour Owns (BAC)
Seymour Owns (EEM)
Seymour Owns (ETFC)
Seymour Owns (F)
Seymour Owns (INTC)
Seygem Asset Management Is Short (VALE)
Seygem Asset Management Owns (GFI)
Seygem Asset Management Is Short (BIDU)
Seymour Owns (FXI)
CNBC.com with wires