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Technical Traders Worry About China Breakdown

To investors who follow fundamentals, Monday looked like an ordinary day in the market. Wall Street erased early losses and closed little changed.

However for investors who follow technicals, Monday was anything but ordinary.

The Shanghai index dropped 1.9 percent and broke a key technical level of 2975. That action worries Todd Gordon of Forex.com.

He thinks that weakness in China could be a signal to sell.

“Typically Shanghai leads the S&P,” he says. ”But right now there’s been a divergence.”

In other words, either China is lagging or the S&P is ahead of itself. Gordon leans toward the latter.

Anthony Scaramucci of Skybridge agrees but adds that a sell-off should be relatively shallow. "I'd think somewhere around 5%," he says.

Both Dennis Gartman and Jon Najarian see developments a little differently. They remain bullish. They say the sell-off in China was a knee-jerk reaction to China's unexpected rate hike.

And they see the rate hike as a vote of confidence in the global recovery - a sign that the recovery is on track and strong.

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CITIGROUP – THE GIFT THAT KEEPS ON GIVING

Always on the quest for the next big move, the Fast Money desk couldn't help but notice the action in some banks stocks.

For example, over the past month Citigroup has gained about 16% while the Dow’s up about 4%.

What’s the bank trade?

I have Citi on my radar, says Todd Gordon. I think we’re looking at a triple top at $5 and typically triple tops don't hold.

It wouldn’t surprise me to see a reverse split in Citi, adds Anthony Scaramucci. That will get shares above $5 and from there I think mutual funds will become buyers.



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Trader disclosure: On December 27th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Funds Managed by Dennis Gartman are short the Euro; Funds Managed by Dennis Gartman are short the Yen; Funds Managed by Dennis Gartman are long Steel; Funds Managed by Dennis Gartman are long Gold; Funds Managed by Dennis Gartman are long Crude Oil; Funds Managed by Dennis Gartman are long Nat Gas; Funds Managed by Dennis Gartman are long Silver; Funds Managed by Dennis Gartman are long Copper; Funds Managed by Dennis Gartman are long Orange Juice; Funds Managed by Dennis Gartman are long Soybeans; Funds Managed by Dennis Gartman are long Wheat; Scaramucci and Skybridge Capital are long USD; Scaramucci and Skybridge Capital own (AAPL); Scaramucci and Skybridge Capital own (C); Scaramucci and Skybridge Capital own (CSCO); Scaramucci and Skybridge Capital own (GS); Scaramucci and Skybridge Capital own (HRB); Scaramucci and Skybridge Capital own (MS); Terranova owns (UPL); Terranova owns (C); Terranova owns (PEP); Terranova owns (VRTS); Terranova owns (OXY); Terranova owns (GS); Cortes is short (LVS); Cortes is short (XRT) vs. the S&P; Cortes owns (TSN); Cortes is long USD vs. the Australian Dollar and the Mexican Peso; Cortes is short Gold; Cortes is short Nat Gas; Cortes is short Corn; Jon Najarian owns (AAPL), is short (AAPL) calls; Jon Najarian owns (MSFT), is short (MSFT) calls; Jon Najarian owns (XLF), is short (XLF) calls; Jon Najarian owns (MS), is short (MS) calls; Jon Najarian owns (BAC), is short (BAC) calls; Jon Najarian owns (CME), is short (CME) calls; jon Najarian owns (CBOE), is short (CBOE) calls; Jon Najarian owns (V), is short (V) calls; Jon Najarian owns (NKE), is short (NKE) calls; Jon Najarian owns (ADBE), is short (ADBE) calls; Jon Najarian owns (GDXJ), is short (GDXJ) calls; jon Najarian owns (MCP), is short (MCP) calls; Jon Najarian owns (REE), is short (REE) calls; Jon Najarian owns (XLF), is short (XLF) calls


JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (ALK)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
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Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
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Virtus Investment Partners Owns More Than 1% Of (MGRC)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
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Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
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TODD GORDON
Gordon is long U.S. Treasuries

DOUG KASS
Seabreeze Partners Management is short S&P

JOHN STEPHENSON
Stephenson has no disclosures

MARYANN KELLER
Keller has no disclosures

MIKE KHOUW
Cantor Fitzgerald & Co. is a market maker in (CHK PRD)

GARTMAN SOT
Funds managed by Dennis Gartman are long Soybeans
Funds managed by Dennis Gartman are long Wheat

ANTHONY SCARAMUCCI SOT
Scaramucci and Skybridge Capital Owned (CSCO) on 11/11/2010
Scaramucci and Skybridge Capital Owned (CSCO) on 12/22/2010

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