Did The Correction Begin This Week?

Eager to learn if the recent downturn is the start of a larger correction, investors are closely watching the action in  bank stocks .

The financial sector led the market higher in 2009 and a growing number of Wall Street watchers worry it will also lead us lower.

From a technical perspective the signs are not good.

Todd Gordon of Forex.com told the desk on Thursday that the chart of Goldman Sachs had formed a distinct head and shoulders formation – a bearish pattern.

And Bill Strazzullo of Bell Curve says the fact that the Bank ETF can’t break above 15 is a big problem.

The financials have outperformed for most of the rally and now they are under-performing. I think that makes it harder for the broader market to go much higher from here.

How should you be trading?

Personally, I happen to think this is the beginning of something bigger, says Guy Adami. We saw nice earnings reports and lousy market action. That’s worrisome. It’s the first time in quite some time.

I also think we're starting a correction, echoes Brian Kelly of Kanundrum. I'm a seller of any rally. And I'd even consider short positions. From a fundamental perspective, if we were in a robust economy we'd see the Baltic Index at highs. Copper would be high. They're not and it leads me to question the global growth story.

I think the question investors should ask is, 'is this the beginning of a deep dive or is it another shallow correction?' I see it as the latter. That makes this a buying opportunity for high quality names on the pullback, counters Joe Terranova.

1085 is a critical level in the S&P, says Tim Seymour. If we break below it the market could slide substantially.

In the SPY the put to call ratio right now is 2-1, says Pete Najarian. That suggests options investors are more bearish than bullish.

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IS CHINA IN A BUBBLE?

Commodities traded lower on Friday as investors grew more worried that China’s decision to put the brakes on growth cut hurt resource related trades.

Meanwhile, Goldman Sachs downgraded the U.S. metals and steel sectors to "neutral" from "attractive," saying China's credit tightening may further weigh on the group.

Goldman also removed U.S. Steel from its Conviction Buy list and shares dropped sharply.

What’s the trade?

The fact that Goldman is removing commodities from the conviction buy list worries me, says Pete Najarian.

I’m watching Freeport , adds Guy Adami. The stock had been making higher highs and higher lows – but it broke that trend on Friday.

I'm a buyer of gold on any pullback, says Peter Schiff.

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Trader disclosure: On January 22nd, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (CLF) Call Spread; Najarian Owns (GS) Call Spread;; Najarian Owns (INTC) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (XLF) Calls; Najarian Owns (TEVA); Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (FXI); Seymour Owns (INTC); Seymour Owns (INFY); Seymour Owns (SBUX); Terranova Is Short (CMA), (ESS), (CAL); Terranova Owns (BAC), (JPM), (XOM), (FTO), (FCX), (EMC), (AAPL), (DELL), (MSFT), (QCOM); Terranova Owns March Copper Futures

GE Is The Parent Company Of CNBC

For Tim Seymour
Seygem Asset Management Is Short (PBR)

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of  (DLR)
Virtus Investment Partners Owns More Than 1% Of  (EXR)
Virtus Investment Partners Owns More Than 1% Of  (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of  (DBV)
Virtus Investment Partners Owns More Than 1% Of  (UA)
Virtus Investment Partners Owns More Than 1% Of  (XLB)
Virtus Investment Partners Owns More Than 1% Of  (XLI)
Virtus Investment Partners Owns More Than 1% Of  (SKT)

For Brian Stutland
Stutland's Firm Is A Market Maker In VIX Options & Futures, Is Short Volatility
Stutland's Firm Is A Market Maker In S&P 500 Options, Is Long Volatility|
Stutland Owns (EMC)
Stutland Is Short (SPY)

For Brian Kelly
Kanundrum Capital Owns (BAC)
Kanundrum Capital Owns (JPM)
Kanundrum Capital Owns (C)
Kanundrum Capital Owns (ACH)
Kanundrum Capital Owns (GE)
Kanundrum Capital Owns (CNI)
Kanundrum Capital Owns (EWA)
Kanundrum Capital Owns (EWC)
Kanundrum Capital Is Short U.S. Dollars Against Short Euro, Yen, Swiss Francs
Kanundrum Capital Is Long British Pounds Against Short Dollars
Kanundrum Capital Is Long April Gold
Kanundrum Capital Is Short (GS)
Kanundrum Capital Is Short (EWY)

For Peter Schiff
Schiff Owns Gold
Schff Is Short U.S. Dollar

Other Relevant Disclosures:

Seymour Owned (GOOG) On 1/21/10
Terranova Was Short Feb. Crude Oil Futures On 1/11/10
Najarian Owned (HUM) Call Spread On 1/14/10, 1/15/10
Najarian Owned (CLF) On 1/5/10

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