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S&P Generating Mirror Image from Previous Year

On Tuesday investors were at odds over whether the market was on the edge of a greater sell-off, or if the weakness was just about over.

Bulls pointed to the afternoon rebound in the S&P.

Although stocks pared gains early in the session, into the close the S&P bounced and by 4p ET closed near its highs. “That kind of action is outstanding,” says trader Guy Adami.

However, bears are not without ammo.

Looking at the market action over the entire month, the S&P fell 1.4 percent, its worst month since August. Adding to the negative side of the argument, a Reuters poll showed investors are the most bearish they have been since the third quarter of last year.

Considering the conflicting signs, should you position for more selling or is the weakness mostly done?

Instant Insights with the Fast Money traders

Trader Tim Seymour’s done some analysis; you see his charts below. And what they show he calls “a little eerie.” Trends in the S&P this year almost mirror the same trends from last year. It’s almost as if the market’s “following last year’s script,” he says.

And that doesn’t bode well for the bulls.

Although Seymour would not be surprised to see the market trend higher over the first few days of June, after that he thinks the bears take over and the market sells down. .

But that's not to say there isn't any positive in this chart - there is.

Seymour also thinks the market will “hit its lows in the 3rd or 4th week of the month. Then we’ll begin to build a base,” he says.

Joe Terranova is also cautious. He points to the flows of capital, with rotation out of commodity funds and into the fixed income markets concerning him. “That tells me for the first time in 6 months the flows have changed. It’s become a much more defensive market. Not a market that suggests an overall meltdown but investors are looking for a slowdown.”

The usually bearish Guy Adami is a tad more optimistic. Like he always says price is truth and the market action has been outstanding. “The market closed on its highs,” he says. “1325 held. Now that we’re pushing toward 1350 I think we’re looking at resistance. But if we do break through then I’d expect another 50-70 points to the upside.”

Karen Finerman thinks that the lousy economic data may actually be bullish. In May consumer confidence fell, single-family home prices dropped, and the ISM-Chicago data showed business activity in the Midwest grew much less than expected.

In the wake of all that bad data, “I wonder if the Street is starting to think there will be some kind of shot at QE3,” she says. ”It gives the Fed room too not tighten to quickly. It’s kind of counter intuitive but it may be risk-on.”

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ANALYZE THIS: GREECE

A new package of loans appears to be on the way for Greece. But what is good for the Greeks in the short term may actually be a sign of bad things to come for the euro-zone as a whole.

Find out why from Sean Egan of Egan Jones Ratings. Watch the video now!









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Trader disclosure: On May 31, 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 (XOM); Terranova owns (KSS); Terranova owns (CVI); Terranova owns (OXY); Terranova owns (TM); Terranova owns (BJ); Terranova owns (DIS); Terranova owns (PFE); Terranova owns (V); Terranova owns (HPQ); Terranova owns (FLX); Terranova owns (JPM); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (VRTS); Terranova is short (DELL); Adami owns (AGU); Adami owns (C); Adami owns (INTC); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Finerman and Finerman's Firm own (AAPL); Finerman's Firm owns (DIS); Finerman 's Firm owns (JPM) leaps and (JPM); Finerman owns (JPM); Finerman's Firm is short (IWM); Finerman's Firm is short (MDY); Finerman's Firm is short (SPY); Finerman's Firm owns S&P 500 Calls; Finerman's Firm owns S&P 500 Puts; Finerman's Firm owns Russell 2000 Puts

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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