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Cyclical Stocks Trying to Tell You Something

Ahead of a two-day EU summit traders were looking for signs to determine whether the market was about to surge or nose-dive.

And trader Steve Cortes, founder Veracruz, a research and consulting firm, thinks the market is getting an important sign from cyclicals.

“Caterpillar is trading at a new low for 2012 and the Morgan Stanley Cyclical Index made up of a basket of cyclical stocks dropped to negative for the year during mid-day trade,” he says.

Cortes takes the price action in both CAT and CYC as two signs that reflect not only weakness in Europe - but also China.

“I really believe cyclical stocks are getting it right. – they are international in nature,” and the woes facing the market are international.

Ultimately Cortes believes weakness in cyclicals will be reflected in the S&P and that any further advance is very unlikely.

Trader Stephen Weiss, managing partner at Short Hills Capital , shares the skepticism. He’s very focused on Europe and a pattern that’s emerged. “Europe tends to make an announcement – not follow through and then the plan falters. How much more of that can the market withstand?”

The usually skeptical Guy Adami, managing director of stockMONSTER.com, is largely on the other side. He thinks the market is range bound and in the short-term the path of least resistance is higher. As he so often says, price is truth, and the price action in the market suggests to him technical levels will provide firm support.

“As long as the S&P can stay above 1292 – the market looks good. And a close above 1325 should bring another 25-handles,” he says.

Trader Pete Najarian, co-founder OptionMonster.com, largely agrees. Although he’s not sure bulls can push the S&P sharply higher he doesn’t think bears can break the market’s back either. “The market is fairly range bound - that's tough for buy and hold investors but great for traders. If you’re nimble there are a lot of opportunities,” he says.

What do you think? We want to know!

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Posted by CNBC's Lee Brodie

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Trader disclosure: On June 26, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Steve Weiss is short JEC; Steve Weiss is short X; Steve Weiss is short MT; Steve Weiss is short JCP; Steve Weiss is long QCOM; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Steve Cortes is long SVU; Steve Cortes is long TREASURIES; Steve Cortes is long DEO; Steve Cortes is short COH; Steve Cortes is short GLD; Steve Cortes is short QQQ; Steve Cortes is short EUR; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long FB CALLS; Pete Najarian is long MSFT; Pete Najarian is long MOS; Pete Najarian is long MMR

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