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S&P May Drop to This New Level: Technical Strategist

Stocks declined Tuesday, despite a handful of positive retail earnings reports, as European debt troubles continue to worry investors. Mark Arbeter, chief technical strategist at S&P, and James Dailey, chief investment officer and senior portfolio manager at Team Asset Strategy Fund, shared their insights.

“From the intermediate term perspective, we’re going to see a pullback here—at least to 1,180 level on the S&P 500, probably down to the 1,130 to 1,150 area, which was the area which we broke out from,” Arbeter told CNBC.

He said he is seeing counter-trend moves in the market, specifically the dollar.

“I think the dollar [index] tops out here—$79 to $80—then these counter-trend rallies are over and then the overall stock market heads back higher again,” said Arbeter.

In the meantime, Dailey said he favors sectors such as energy and basic materials—areas that benefit during the later cycle of an economic recovery.

“Energy’s been a laggard and some segments of the material sector have lagged during the recovery so far, and that’s very normal from a quantitative perspective,” he said.

“They tend to take leadership up towards the middle and the latter stages of the recovery—valuations are very attractive and many of them have formed very extended bases, where there’s a lot of pent-up energy and could break out to new highs.”

Dailey Favors:

Kellogg

Verizon

AT&T

Diamond Offshore

Statoil

Martin Marrietta

Arbeter’s Recommendations:

Likes: Industrials and Materials

Avoids: Financials, Health Care and Utilities

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Scorecard—What They Said:

  • Arbeter's Previous Appearance on CNBC (May 21, 2010)
  • Dailey's Previous Appearance on CNBC (Oct. 20, 2010)

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More Market Views:

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CNBC Data Pages:

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CNBC Slideshows:

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Disclosures:

No immediate information was available for Arbeter or Dailey.

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Disclaimer

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