Pros: Despite Tax Cuts, Technicals Signal Sell-Off?

Investors are closely watching the the S&P with Tuesday’s market action triggering chatter that a sell-off may be at hand.

Early in the session, news that President Obama had agreed to extend Bush-era tax cuts sent the S&P above its 2010 closing high of 1225 – but the bulls couldn’t gain any additional traction.

”There was every reason for the market to breakout and it didn’t,” says Fast Money trader Tim Seymour. In fact, the market pared gains into the close with 1228 remaining a strong level of resistance.

"The market has had a nice run. Investors are a little nervous about the move we just had and are looking for any type of reason to sell off," says Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in a Reuters interview.

What should you be watching?

Instant Insights with the Fast Money traders

Fast Money trader Joe Terranova doesn’t like the reversal. ”I’m now seeing significant institutional selling in oil , gold , silver , cotton and grains,” he says.

As a result Terranova thinks it’s time to raise stops and take profits; something he did with Freeport McMoRan. ”I have no doubt that in 2011 equities will be the place to be," he adds "but retail investors have to be more active and recognize when it’s time to get out of the market.”

And Terranova thinks that time is now. “Treasurys sold off on Tuesday and that money did not rotate into stocks. That’s a sign to take profits.”

Both Tim Seymour and trader Guy Adami share the skepticism. “I can’t help but wonder if China implements a rate move, it has to be detrimental to US equities,” Adami says. "The dollar looks like it wants to go higher and if it does, there's no question in my mind we're going to see a pullback," adds Seymour.

Anthony Scaramucci, a Fast trader and hedge fund manager, sees the market a little differently.

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“I think the long-term macros are fantastic,” he says. “The Fed, the President and Congress are moving in concert to stimulate the economy.”

Scaramucci goes on to say in conversations with peers such as Elaine Garzarelli and David Costin at Goldman Sachs he’s hearing the market is probably 20% undervalued.

”That may scare people but I don’t think it should,” he says. “When I look at what the Fed is doing and think back to what Japan did when they did aggressive quantitative easing with a fiscal package - it worked for the stock market."

Responding to Terranova, Scaramucci admits there’s weakness in commodities but adds, “The reversals in commodities are probably short-term.”

What do you think? We want to know!

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Trader disclosure: On December 7th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour Owns (AAPL), (BAC), (BX), (CSCO), (GE); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova Owns (C), (GS), (NKE), (OXY), (PEP), (PFE), (VRTS), (UPL)

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