Halftime Report: How Deep Will Correction Get?

Investors spent Monday struggling to make heads or tails out of the action in the S&P.

Tails or should we say tailwinds generated by upgrades of Home Depotand Disney were not strong enough to overcome the headwinds generated by economic weakness in Europe.

With bearish sentiment prevailing, materials, energy, tech and financials are now all down over 10% from their closing highs of January 19^th.

How deep will the correction get?

Strategy Session with the Fast Money traders

I think it’s a good sign that the sectors mentioned above, which led the market higher in 2009 have corrected, says Zach Karabell of River Twice. If you share my fundamental thesis that things are getting better this is an opportunity to get long. On dips, I’m a buyer of tech, energy, materials and some industrials.

On the S&P, 1070 is a key level, adds OptionMonster Jon Najarian. I think the market is worn out a bit from reversing Friday’s triple digit plunge, but as long as the technicals aren’t broken, I’d stay long into the close.

To me, it does not look like the bulls are charging ahead, instead I think the bears are taking a pause, muses Joe Terranova. With a quality name like 3M lower, I’m cautious on the market.

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FOLLOW CHINA?

According to a NY Times Report, China Investment Corp., Beijing's $300 billion investment fund, just disclosed a detailed list of its holdings – and it includes positions in Apple , Coca-Cola, Johnson & Johnson, and more.

Should you follow China into these names?

I don’t think that this is the best guide, says Zach Karabell. I’d buy what China is buying as a economy rather than buy what China is buying as an investment corporation.

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COMMODITIES RISE AS DOLLAR FALLS

Oil rose toward $72 a barrel on Monday, as a weaker U.S. dollar buoyed commodities broadly.

What’s the energy trade?

I’d wait until the end of the week, says Joe Terranova. But then I’d consider a long position.

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TOPPING THE TAPE: CHIPS

Technology was among the best performing sectors in the S&P Monday with chip stocks outperforming in the sector.

How should you be positioned?

Support should be around $23.50 in the SMH, says Todd Gordon. I’d target upside around $25. I think there’s a short term corrective trade to the upside.

I think it’s much better to pick individual semi names than pile into the index, counters Zach Karabell.

Keep an eye on ERTS, adds Jon Najarian. They report after the bell.

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TRADING THE GLOBE: EMERGING MARKETS CONTINUE TO STRUGGLE

As we mentioned above, investors are grappling with persistent worries about economic weakness in parts of Europe and as a result EM is down broadly, about 13% off its highs.

How should you trade emerging markets, now?

The long term emerging markets story remains in tact, says Tim Seymour, but technically I’m not sure investors should run in right here. EM may trend lower before it turns.

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CALL THE CLOSE

Jon Najarian: I think the market is worn out a bit, but as long as the technicals aren’t broken, I’d stick with it. 1070 is key.

Todd Gordon: I’m long euro but I’m hesitant.

Zach Karabell: I’m a buyer of tech, energy, materials and some industrials.

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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,
Swiss Franc
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)


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