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Trader Draws Line in Sand at S&P 1370

On Monday investors were trying to figure out if the stock market was about to bounce or if it was in the early stages of a bigger move lower.

Both the Dow and the S&P 500 extended losses to a fourth day with investors taking their cues from last week's disappointing jobs report. That, in turn, called fundamentals into question by raising new concerns about the strength of the recovery.

The technicals were also somewhat concerning.

The Dow Jones industrial average closed below its 50-day moving average for the first time since December 19th.

Should you prepare for a bigger sell-off?

If you're looking for a 'tell', trader Steve Grasso says watch the S&P and how it behaves if it tests 1370. “I think we hold 1370 – but if we break lower – it’s 50-handles down,” he says.

(1370 was the high end of a range that served as strong resistance in 2011. The conventional wisdom in technical analysis is that what was once resistance becomes support.)

Trader Brian Kelly is cautiously optimistic. "Basically I think down 1.5% is it. We need another negative catalyst to get us lower," he says. "I think we're stabilizing."

However, he does say that market weakness at the end of the session was concerning. “And high yield has really been underperforming. That's been happening for almost a week. That too is a warning sign." He suggests watching HYG as a 'tell.'

Trader Joe Terranova leans on the bullish side of the argument. “I think we’re in a pause after a 30% rally since October – but I think it's a pause that refreshes.”

The one caveat that concerns Terranova is the potential for a stronger dollar. A strong dollar calls the commodity trade into question, and that’s bearish for related natural resource stocks.

Trader Karen Finerman feels a little differently. She thinks tech could drive the market higher. “Valuations in big cap tech such as Microsoft are not at all stretched,” she says.




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Trader disclosure: On Apr 9, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM; Karen Finerman is long HPQ; Karen Finerman is long SPY; Karen Finerman is long IWM; Karen Finerman is long MDX; Karen Finerman is short SPY; Joe Terranova is long VRTS; Joe Terranova is long IBM; Joe Terranova is long MED; Joe Terranova is long GS; Joe Terranova is long EMC; Joe Terranova is long MSFT; Joe Terranova is long HFC; Joe Terranova is long JOY; Joe Terranova is long OXY; Joe Terranova is long HPQ; Joe Terranova is long LQD; Joe Terranova is long COG; Steve Grasso is long ASTM; Steve Grasso is long AVAV; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long MHY; Steve Grasso is long NUAN; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long PRST; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA; Brian Kelly is long USG; Brian Kelly is long IWM; Brian Kelly is long KRE; Brian Kelly is long US DOLLAR; Brian Kelly is short HYG; Brian Kelly is short YEN; Brian Kelly is short EUROSTOXX; Scott Nations is long SPY; Scott Nations is long C; Scott Nations is long BAC

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