Stocks fell again on Thursday with a sell-off in the technology and materials sectors leading the market lower.
Perhaps most troublesome, upbeat economic data on jobs and housing couldn’t ignite any momentum among the bulls.
That seems to be an emerging pattern. One day ago Wall Street suffered its worst drop in nearly two months despite strong results from Apple and IBM .
As a result, investors are starting to worry that the sell-off may grow into a full blown correction.
"I do consider it to be the start of a something more," says Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in a Reuters interview. "We're looking for a 5 percent to 7 percent pullback range, and I think we started it yesterday."
What should you be watching? What’s the trade?
Instant Insights with the Fast Money traders
Guy Adami agrees that this may be the beginning of a bigger decline. He sees a serious of negative catalysts. “It started with Intel which released great earnings but couldn’t rally,” he says. “Same with Apple.” Also there was a Brazil rate hike and now China. (China's economy unexpectedly accelerated in the fourth quarter of 2010 despite a series of tightening measures, triggering speculation that Beijing would tighten further) “I think we’re going to take a pause,” he says.
Steve Grasso is keeping a close eye on key technical levels on the S&P. “1272 is a level to watch,” he says. “If it can’t hold, I think we dip to 1265 then 1257 – which is flat on year. Then the next stop is probably 1228.”
Steve Cortes is also quite bearish. As he’s said in the past, he's concerned about the divergence between Shanghai and the S&P.
“Our market has been closely correlated with China's, but recently the Shanghai has been breaking down on inflationary concerns and is now at the lowest levels in about 4 months.” He thinks either China is cheap or the S&P is ahead of itself and he leans toward the latter.
Jon Najarian is a tad more optimistic. He’s looking at action in the Vix which traded up to nearly 19. “It’s a big move, but it’s pulled back, he says.” (That's a somewhat bullish indicator.) And rather than interpret the spike as a sign of fear in the market he says, “I think investors are (using options) to take shots.”
THE CANARY IN THE COAL MINE?
As we mentioned above, China's economy unexpectedly accelerated in the fourth quarter of 2010 despite a series of tightening measures.