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If This S&P Level Holds, Buy the Draghi Dip: Pro

If you’re running for the exits, worried that the ECB is all talk and no action, pro trader Guy Adami, managing director of stockMONSTER.com, thinks you’re trading the market all wrong.

“Come on. We’ve seen this 50 times over the past few years,” says the pro. "A negative headline out of Europe takes us down 20 S&P handles."

Indeed the latest developments from Europe dragged the S&P lower and sent the Dow tumbling by triple digits.

The catalyst was ECB President Mario Draghi who disappointed investors.

The Street had been hoping for bold actions such as an aggressive stimulus program since Draghi's pledge last week to do 'whatever it takes' to defend the euro. But, instead, Draghi said any new action was conditional on euro zone governments using their bailout funds first.

“We almost always go down on headlines like this,” Adami says. And time and again the trade has been to buy the dip.

“A few days after a headline like the one we got today -- we go up. And I don't think that trend will stop anytime soon.”

Part of Adami’s thesis stems from his belief that the S&P is the proverbial good house in a bad neighborhood. That is, investors are almost compelled to buy US stocks; it's one of the few investments that generates return amid relative safety.

To support his thesis, Adami points to Vix, which he thinks would have spiked a lot more if there was truly fear in the market. “Sure, today feels bad but the Vix suggests it’s probably not that bad. As long as we stay above 1344 in the S&P I think we’re fine.”

Trader Stephanie Link, director of research at TheStreet, agrees with Adami. She reminds that the markets rallied 2.5% in about a week, since Draghi spoke the first time, suggesting a sell-off was warranted.

Link tells us the way to play the market is to selectively buy the dips. For her that’s Bristol Myers, GE and Devon.

Trader Brian Kelly, founder of Shelter Harbor Capital, is more cautious. He says if Draghi does act it will drive the euro lower which in turn would drive the dollar higher – and lately that’s been bearish for the S&P. “I think we have to wait,” he says.

Trader Jon Najarian, co-founder OptionMonster.com, agrees that Draghi could still unleash serious firepower. “He knows it works better as a surprise,” muses Najarian. “They could still fire a bazooka.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 2, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; ; Jon Najarian is long call spreads in GMCR; Jon Najarian is long call spreads in OCN; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in YELP; Jon Najarian is long call spreads in MON; Jon Najarian is long put spreads in HPQ; Jon Najarian is long put spreads in KCG; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long CIGX; Jon Najarian is long GLUU; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long MCD; Stephanie Link is long DD; Stephanie Link is long GE; Brian Kelly is long SPY Puts; 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

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