Yet another technical indicator has surfaced suggesting stocks are over bought and about to fall.
It's the second sign in as many weeks.
Last week we told you about a potential double top pattern that was forming. What must you know, now?
Instant Insights with the Fast Money traders
I’m watching the Relative Strength Index, explains Scott Nations of NationShares, which suggests the S&P is really close to overbought.
The RSI compares the magnitude of up moves to down moves over a period of time; essentially it’s a measure of momentum, Nations explains. Traders use the RSI to determine if momentum – and not fundamentals - has carried the market beyond where it should be. Above 70 is considered oversold and on Friday the RSI closed at 69.
But after the extended rally we had in financials it doesn’t surprise me to see the sector pullback (and as a result the broad market), muses Zach Karabell of RiverTwice. I still think stocks hold an upward bias and I’d look for entry points selectively.
The Street is chattering about the intra-day reversals in Citi as well as Goldman , explains Jon Najarian. But I think they’re natural pullbacks more than anything. However, I expect the S&P to fall – but largely because of weakness in Google .
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GOOGLE TO LEAVE WORLD'S BIGGEST MARKET?
Shares of Google traded lower largely due to mounting signs the company could soon shut its Chinese-language search portal due to censorship.
Google has been in a two-month standoff with Beijing over restrictions on the Internet. Many experts have doubted China's ruling Communist Party would compromise on censorship, and on the weekend the Financial Times reported the talks had reached an impasse and Google was "99.9 percent" certain to shut its Chinese search engine, Google.cn.
What’s the trade?
I think the Google news is potentially big news, muses Jon Najarian. As mentioned above, I think the S&P falls because of weakness in Google.
I don’t think China has a material impact on Google’s core business, counters Zach Karabell. I’m a buyer on the pullback.
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MARKET BUZZKILL: COMMODITIES CLOBBERED
Commodities and related natural resource names traded lower on Monday due to persistent concerns the Chinese government may tighten credit, and as a result, slow the global economy. Oil challenged $80 but couldn't break above it.
What’s the trade?
$80 is an important technical level, explains Jon Najarian. The action suggests to me that oil rolls over and comes down to about $75.
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SET THE RECORD STRAIGHT: CONSOL ENERGY
Shares of Consol Energy dropped on Monday after the firm announced plans to buy Dominion Resources Appalachian natural gas properties for $3.48 billion in cash.
The deal gives Consol a leading position in the growing Marcellus Shale field and is the latest sign that energy companies are targeting faster development of natural gas resources as the fuel wins an increasing share of the global energy market.
As you might remember, in December, Exxon Mobil announced it would buy XTO Energy for about $30 billion in stock in a bid to expand its natural gas portfolio in North America and the Marcellus Shale.
"This clearly makes them a bigger gas player," says Brett Levy, an analyst at Jefferies. "(But) I don't think it changes the mix between coal and gas today, maybe down the line it will."
Consol said the purchase would boost its proved reserves of gas by more than 50 percent to about 3 trillion cubic feet and double its potential reserves to about 41 trillion cubic feet.
”This is a low cost production play. Even at $4.50 gas we make a 22 percent return on investment,” says Consol CEO Brett Harvey. "It's a good deal for us."
The deal is expected to close on April 30, and is expected to account for as much as 35 percent of Consol's total revenue.
What’s the trade?
This deal suggests to me that companies with big proven reserve are probably under-valued, muses Scott Nations.
But playing nat gas is dicey, reminds Zach Karabell. There’s a huge amount of nat gas coming online. Personally, I’m worried about a surplus of supply.
I’d be a buyer of Exxon on the dip, says Jon Najarian.
What else must you know about this deal? Find out from our interview with Consol CEO Brett Harvey. Watch the video now!
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CALL THE CLOSE
Jon Najarian: I think the S&P falls because of weakness in Google.
Zach Karabell: I think it’s an upward biased market so I’m looking for entry points.
Scott Nations: I think the S&P is overbought and I'm a seller
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Trader disclosure: On March 15, 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); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm And Finerman Own (JPM); Finemran's Firm Owns (WFC) Preferred; Finerman's Firm Owns (BSX), (OSIP), (TGT), (WMT); Finerman's Firm Owns (KFT); Kelly Owns (AMZN) Calls; Kelly Owns (ELX) Calls; Seymour Owns (BX), (EEM), (FXI), (MSFT), (XOM), (AAPL), (BAC), (GE), (F); Jon Najarian Owns (FCX), Is Short (FCX) Calls; Jon Najarian Owns (MSFT), Is Short (MSFT) Calls; Jon Najarian Owns (TGT), Is Short (TGT) Calls; Jon Najarian Owns (WMT), Is Short (WMT) Calls; Jon Najarian Is Short (GOOG) Through Put Spreads; Jon Najarian Owns (GS), Is Short (GS) Calls; Jon Najarian Owns (C), Is Short (C) Calls; Karabell Owns (FCX), (NKE), (GOOG), (FXI), (C); Nations Owns (MSFT), (SPY)
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