Bank stocks, the worst performing sector of 2011, was among the biggest gainers with Bank of America notably stronger after hitting a 2-year low on Monday.
Considering the S&P 500 has fallen nearly 5 percent since its bull market high at the start of May, has the market found the bottom of its range? Or will the correction continue?
Instant Insights with the Fast Money traders
If you’re involved in the market, trader Joe Terranova says the question to ask yourself is simple: Is the market slowing down or melting down?
For a ‘tell’ he suggests keeping a close eye on the Russell. “If you want an indication of how deep the correction will be – look at small caps,” he says. That’s because these smaller companies tend to be highly sensitive to the economy. "They’ve led the market lower, and they're leading the market back up on Tuesday. "The price action, that's your lead," he says. In other words, Terranova thinks the turn higher on Tuesday could be meaningful and a potential signal that stocks have found a bottom, at least in the short-term.
Terranova is also cautiously bullish because he thinks the dollar “remains in its structural downtrend – fundamentally I see no reason for it to change,” he says. That should be bullish for commodities as well as the broad market because lately the dollar and S&P have been moving inversely.
Trader Steve Cortes isn’t nearly as optimistic. He thinks the market is making a temporary pause but expects selling to "continue and persist."
Longer term he disagrees with Terranova and expects the dollar to get stronger for a slew of reasons including the end of QE and a growing call for austerity in Washington DC. Combined with the weak economic data and “the scope of selling we’ve seen over the last couple of weeks, Tuesday’s gains are not consequential,” he says.
Fast Money friend Peter Boockvar is in the same camp as Cortes. "We did get oversold and we're probably due for this bounce, but I don't think it's anything more than a bounce in a continued downtrend," he says in a Reuters interview.
And it's worth noting that all the Fast Money traders agree that the biggest catalyst that could determine if the S&P has made a near term bottom will come from comments made by Ben Bernanke who will deliver a planned address Tuesday afternoon at the International Monetary Conference in Atlanta.
GOLD SITS OUT THE RALLY
Elsewhere in the market, the traders were keeping an eye on gold which steadied but did not rally significantly on Tuesday, despite declines in the dollar.
Gold tends to have an inverse relationship to the dollar, because it becomes cheaper for holders of other currencies when the greenback get weaker and it is sometimes bought as an alternative asset.
What should you make of it?
Brian Kelly thinks the relative weakness is simply profit taking. “But if it continues for another day or so I’d grow concerned,” he says
Steve Cortes just doesn’t see any reason for gold or any of the precious metals to rally significantly because they’re largely used as a hedge against inflation and Cortes doesn’t see any serious inflationary pressure.
BREAKING NEWS FORD
In breaking news CNBC reporter Phil LeBeau tells the desk Ford will be paying down $2.3 billion in term loans and paying off an $800 million revolving credit line; two more examples, he says, of Ford’s aggressive steps to reduce debt.
What’s the trade?
Joe Terranova thinks the move is a sign that Ford is cleaning up the balance sheet so the company can make aggressive moves in Asia. “I think (Ford stock) will be slow and methodical rise,” he says.
Brian Kelly thinks the move is good but adds “there are also a lot of headwinds in the space. I just don’t see any catalysts in the auto industry.”
All eyes will be on Ben Bernanke this afternoon as the Fed chief takes to the stage at the International Monetary Conference in Atlanta. Investors will be watching for hints of a possible QE3 in the works.
What should you expect?
Find out from Marc Chandler. the global head of currency strategy from Brown Brothers Harriman. Watch the video now!