Chatter on the Street Monday had everything to do with the market’s next big move and whether the rally was out of steam after stocks closed near their lows of the day, completely paring gains made early in the session.
Also noteworthy, the CBOE Volatility Index, Wall Street's fear gauge, rose sharply. The VIX index, which often moves inversely to the S&P 500, measures the cost of hedges or protection investors are willing to pay against a fall in the broad market.
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Joe Terranova calls Monday’s market action an “ugly reversal.” He says for the first time in while, "You have to wonder whether the market has run out of steam.” After the market's sharp gains last week, Terranova seems to feel there's cause for concern.
Guy Adami reminds the desk that lately “every reversal has been a buying opportunity." He suggests keeping an eye on 1350 as a key technical level. "What was resistance becomes support," he says. In other words, whether 1350 holds or not could be telling.
Trader Steve Grasso is more focussed on action in the Dow which swung 92 points from its high of the day to its low.
He thinks the Dow may be approaching an area of resistance. "When we bump up against 12,978 the Dow may come in substantially," he says. According to technical analysis, Grasso thinks the move lower could be 500-800 points.
Tim Seymour appears to be on the other side of the trade and suggests that the market should not be out of steam.
He’s focused on strong economic data overseas such as European PMIs which he calls "unbelievably strong". Also he says Germany's unemployment hit its lowest in 19 years and China's PMI came in soft. He interprets all the data points to mean “the world is a better place. ” That suggests to him that stocks could have more upside, as a result.
The traders were also closely watching the action in defense stocks after after President Obama confirmed that al Qaeda leader Osama bin Laden had been killed in a firefight with US forces.
Although these developments won't change political pressure to cut defense spending, according to Alex Hamilton of Early Bird Capital look for the government to continue spending on two areas: drones and cyber.
In the space, he suggests putting CACI on the radar. Trader Guy Adami likes SAI . “I think this is a stock that can move higher from here,” he says.