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Halftime: Is Sell-Off a One Day Event?

The Dow tumbled by triple digits on Tuesday with anxiety prevailing on Wall Street as investors tried to determine if the sell-off was a buying opportunity or the start of a bigger correction.

Energy was again the wildcard with the price of oil surging on reports that Muammar Gaddafi used tanks, helicopters and warplanes to quell a growing revolt in Libya and scoffed at reports he was fleeing after four decades in power. Libya is among the world's top 20 oil producing nations.

Although developments are short-term bullish for oil, they’re extremely bearish for the fragile consumer who may already be facing sharply higher prices across the board.

However, not all the market influences were negative. Consumer Confidence rose in February to a three-year high on improved optimism about the economy and income prospects.

And from a historical perspective, lately pullbacks in the S&P triggered by overseas unrest have been buying opportunities.

How should you position now?

Instant Insights with the Fast Money traders

Fast trader Joe Terranova has spotted signs that suggest Tuesday’s sell-off will be more than a one-day event.

Specifically, he's watching the shift in momentum. “Over the first 7 months of this year, when we’ve had a weak equities, market buyers have stepped in,” he explains. But that didn’t happen on Tuesday. He takes it as a sign that the very strong bullish momentum that had provided the rally with an underpinning was beginning to wane.

And as market ‘tells’ he points to negative price action in areas of the market where hedge funds had been heavily allocated. “The price action in Apple, the price action in copper and the price action in grains ,” he says. In other words, if the bulls were going to push the market higher, they would have bounced. "Risk is coming off the table, clearly," he says.

Brian Kelly feels much the same. “I’m cautious,” he says. “I had hoped the market would look though the unrest in the Middle East, but that doesn’t seem to be happening.” I’m long bonds and TLT and remain long oil."

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THE OIL GAME

If you’re looking for a bullish bet, you’re probably looking at crude. But Stephen Schork of The Schork Report, suggests trading oil cautiously. “Oil in the mid-to high 90’s has been a range to sell into,” he reminds. That doesn’t mean WTI can’t break $100; he tells us it can. It’s simply that he doesn’t think the economy can withstand $100 oil for any length of time.

Jon Najarian is seeing similar bets in the options market. “I’m seeing aggressive call selling in the USO ,” he reveals, “which suggests at least some investors are betting that WTI has topped out.”

Joe Terranova feels a little differently. Although he's cautious on the refiners and has rolled out of his position in CVR Energy, “I’d be flat energy,” he says but not short. If you’re looking for a long bet Terranova likes companies connected to Canada’s oil sands. “That’s where stability is,” he says.

Meanwhile, trader Patty Edwards is also quite concerned that higher oil will translate into higher prices at the pump. “Consumers will have to pullback somewhere – I’d expect to see that in retail . She’s particularly bearish Walmart , which she calls a house of pain, because Walmart consumers are hard hit by rising energy costs.


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Trader disclosure: On Feb 22, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (MS); Terranova Owns (SLXP); Terranova owns (TEVA); Terranova Owns (BAX); Terranova Owns (CVI); Terranova Owns (RSX); Terranova Owns (SU); Terranova Owns (CNQ); Jon Najarian owns (AMD), is short (AMD) calls; Jon Najarian owns (BX), is short (BX) calls; Jon Najarian owns (CHK), is short (CHK) calls; Jon Najarian owns (CLX), is short (CLX) calls; Jon Najarian owns (CME), is short (CME) calls; Jon Najarian owns (CCL), is short (CCL) calls; Jon Najarian owns (CSTR), is short (CSTR) calls; Jon Najarian owns (CBOE), is short (CBOE) calls; Jon Najarian owns (GNW), is short (GNW) calls; Jon Najarian owns (NYX), is short (NYX) calls; Jon Najarian owns (BP), is short (BP) calls; Jon Najarian owns (PAAS), is short (PAAS) calls; Jon Najarian owns (SLW), is short (SLW) calls; Jon Najarian owns (GLD), is short (GLD) calls; Jon Najarian owns (NBR), is short (NBR) calls

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For 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 (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
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)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
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)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DPUKF)

For Patty Edwards
Edwards owns (SPY) for clients
Edwards owns (XLB) for clients
Edwards owns (GLD) for clients
Edwards owns (SLV) for clients
Edwards owns (CAT) for clients
Edwards owns (BP) for clients
Edwards owns (BA) for clients
Edwards owns (AMZN) for clients
Edwards owns (V) for clients
Edwards owns (JNJ) for clients
Edwards owns (AAPL) for clients
Edwards owns (GOOG) for clients
Edwards owns (MSFT) for clients
Edwards owns (C) for clients
Edwards owns (GE) for clients
Edwards owns (TGT) for clients
Edwards owns (CME) for clients
Edwards owns (HD) for clients
Edwards owns (FXI) for clients

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (AGO)
Accounts Managed By Kanundrum Capital Own (AMD)
Accounts Managed By Kanundrum Capital Own (INTC)
Accounts Managed By Kanundrum Capital Own (ATW)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (EBAY)
Accounts Managed By Kanundrum Capital Own (FRO)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (PGH)
Accounts Managed By Kanundrum Capital Own (PWE)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (TER)
Accounts Managed By Kanundrum Capital Own (TLT)
Accounts Managed By Kanundrum Capital Are Long Treasury Bond Futures
Accounts Managed By Kanundrum Capital Are Long Oil Futures
Accounts Managed By Kanundrum Capital Are Long The Euro
Accounts Managed By Kanundrum Capital Are Long the British Pound
Accounts Managed By Kanundrum Capital Are Short The Australian Dollar
Accounts Managed By Kanundrum Capital Are Short The U.S. Dollar

For Stephen Schork
No disclosures on Oil

For Richard Kugele
Kugele has received compensation based upon various factors and Needham's overall revenues
Needham's overall revenues include investment banking
Needham makes a market in (DELL)



CNBC.com with wires.

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DJIA
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S&P 500
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CVI
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DBA
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ISH BAR 20YTB
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USO
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WMT
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SPDR SPRET
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AAPL
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