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Stay Bullish Until These Two Signs Say Otherwise: Pro

On Tuesday, pros were watching the market melt up take stocks to four-year highs, with the S&P now more than 3 percent higher in August alone.

Although the action seems bullish, "The drawback to this most recent strength is that although we have achieved new cyclical bull market highs, the action may have pushed a good number of stocks into overbought territory " says Dan Wantrobski, director at Janney Capital Markets in a Reuters interview.

If stocks are overbought, is the market at an inflection point?

Trader Josh Brown says not yet – but it could happen at the drop of a hat. And on CNBC’s Fast Money Halftime Report Brown reveals market ‘tells’ that he’ll be watching.

“First there’s small cap strength. As long as that continues the light is green to own stocks,” says Brown.

“The second is participation. Watch new highs versus new lows and watch advances vs. decliners. That’s how you know when to walk away.”

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Trader Stephen Weiss shares the outlook. “I remain a buyer of the market,” he says. Weiss feels that US data has improved and Europe’s crisis appears to remain ring-fenced. However, he also suggests watching these market influences tirelessly. “It could all change in the blink of an eye.”

The usually bullish Joe Terranova is more skeptical of the market at current levels.

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“In the near-term I think the market will pullback to 1390,” he says. And he agrees with Brown that an important tell will be participation. “In order for the S&P to hold at 1390, we’ll need to see participation in energy and some of the unloved names.”

What do you think? We want to know!


Posted by CNBC's Lee Brodie

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Trader disclosure: On August 21, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Josh Brown is long AAPL; Josh Brown is long DEM; Jon Najarian is long AAPL CALL SPREADS; Jon Najarian is long BAC CALL SPREADS; Jon Najarian is long JPM CALL SPREADS; Jon Najarian is long WFC CALL SPREADS; Jon Najarian is long GLD CALL SPREADS; Jon Najarian is long SBUX CALL SPREADS; Jon Najarian is long FB CALL SPREADS; Jon Najarian is long EEM CALL SPREADS; Jon Najarian is long GLUU; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long STSI; Stephen Weiss is long JPM; Stephen Weiss is long AAPL; Stephen Weiss is long TBT; Stephen Weiss is long WLT; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long SBUX; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long CSTR; Joe Terranova is long CHKP; Joe Terranova is long EMC; Joe Terranova is long NXPI; Joe Terranova is long SEPT. XLF $15 CALLS; Joe Terranova is long AAPL $640 PUTS

For Ann Winblad
Ann Winblad is long AAPL
Ann Winblad is long GOOG



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