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Global Sell Off Start Of Something Bigger, Says Adami

On Monday, the S&P 500 suffered its worst loss in seven weeks, dragged down by weak GDP data from Japan and a disappointing outlook from Lowe's which amplified worries about the fragile consumer. The move lower here in the U.S. mirrored weakness around the world; the Shanghai stock market tumbled almost 6 percent and the major indexes in Europe fell more than 1.5 percent.

What’s the word on the Street?

I think Monday's weakness is the start of something bigger, speculates Guy Adami. I think the S&P goes to 970. And if we close below 970 it could slip to 905.

I also expect a correction, adds Tim Seymour, but I think they will be shallow. Don’t forget we’ve had an extraordinary move higher in the market so a move down to 950 wouldn’t surprise me.

I think the market action feels healthy, muses Karen Finerman. Relative to the move higher, I’m not terribly worried by Monday's weakness.

If you’re looking for a trade, I’d look at UNH, adds Adami. It closed up in a lousy tape. That’s an interesting move.

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CHART OF THE DAY: FEAR BAROMETER RISING

The CBOE Volatility Index jumped on Monday on renewed concerns about the potential strength of the economic recovery. Considered to be Wall Street's fear gauge, the Vix often moves inversely to the broad S&P 500 index.

Is the Vix signaling deeper losses to come?

The Vix never even got close to 30, adds Pete Najarian. That says to me investors are scrambling but they’re not panicked. And right now options are relatively cheap. The spike in the Vix may be all about investors protecting themselves now, because the price is attractive.

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TRADING THE GLOBE: STORM STARTED IN CHINA

Chinese stocks tumbled 5.8 percent to their lowest close in two months on Monday, posting their biggest daily percentage drop in nine months.

“Regulators' warnings to banks on risk and a gloomy commodity market triggered panic selling," explains Tang Yonggang, chief strategist at Hong Yuan Securities.

Don’t forget David Rosenberg has said, China’s Shanghai index has proven to be a leading indicator for the rest of the globe...it led the way down last Fall and led the upturn last November, reminds Tim Seymour.

What’s the trade?

You can look at Baidu , says Tim Seymour. I’m short and betting it goes down to $280. I’d also be shortPetroChina and maybe even the FXI.

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BANKS HIT HARD

Investor sold off bank shares after Bank of America, the largest U.S. bank, said credit card defaults inched up in July as more Americans lost jobs and many continued to struggle to pay their debts.

What’s the trade?

Despite Monday’s move I think Bank of America is a long-term buy, says Karen Finerman.

I’ve got my eye on Wells Fargo, says Guy Adami. $24.50 would be my entry point.

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CONSUMER, HOUSING NAMES SLAUGHTERED

Consumer and housing shares fell after Lowe’s posted a 19 percent drop in quarterly profit on Monday and forecast current-quarter earnings below Wall Street estimates as consumers put off big home projects.

What’s the trade?

If the tape corrects, I’d look at Home Depot, says Guy Adami. I like it on a pullback but not at current levels.

In the housing space I like Centex, says Karen Finerman. And if you’re looking to play consumers I’d do it by getting longWalmart and short the XRT.

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OIL, MATERIALS NAMES PLUNGE

Oil fell over 3 percent to below $66 a barrel on Monday, its lowest this month, as investors became more cautious about the pace of global economic recovery and a potential revival in energy demand.

What’s the trade?

I expect oil to continue to struggle in this tape, says Tim Seymour. With the dollar stronger oil should remain under pressure.

I'd put Schlumberger on the radar, counsels Guy Adami. I’m a buyer around $49.50.

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TOPPING THE TAPE: INSURERS UP

The dwindling prospect of a government-run health insurance plan lifted the shares of Aetna and other managed care companies on Monday and relieved investors who feared the companies could not compete with such a plan.

Health and Human Services Secretary Kathleen Sebelius said on Sunday that nonprofit cooperatives could also fulfill the White House goal of creating more competition on insurance. Analysts viewed the co-ops as a far less threatening to managed care companies, even as details on them remain unclear.

"This is the best-case scenario," says David Heupel, a portfolio manager with Thrivent Investment Management. It "takes off the table anything really, really onerous for the group, and that's a huge positive."

What’s the trade?

I think the standout in the sector is UnitedHealth, says Guy Adami. That stock has really run and if I owned it, I’d be taking profits.

Options activity in the space is bullish, adds Pete Najarian.

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SANTELLI ON SAFE HAVENS

U.S. Treasury debt prices climbed on Monday, with the 30-year bond up over a point as investors showed keen interest in the safe-haven appeal of government debt.

"The Treasury market is pretty much looking at the stock market, which is down pretty substantially not just here but overseas -- that is giving a bid to Treasuries," says Jay Mueller, senior portfolio manager with Wells Capital Management in Milwaukee, Wisconsin.

What’s next for the Treasury market?

Find out from CNBC’s Rick Santelli. Watch the video now!




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Trader disclosure: On Aug 17th, 2009, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (BAC); Najarian Owns (BBT) Call Spread; Najarian Owns (C) Calls; Najarian Owns (FCX), Is Short (FCX) Calls, Owns (FCX) Puts; Najarian Owns (HD) September And Is Short (HD) August Calls; Najarian Owns (HPQ) September Calls And Is Short (HPQ) August Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (UNH) Calls; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (MSFT), (TGT), (WMT), (CTX); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (USO), (XRT); Finerman's Firm And Finerman Own (PDE); Seygem Asset Management Is Short (BIDU); Seymour Owns (AAPL); Seymour Owns (BAC); Seygem Asset Management Is Short (FXI)

For Jeff Tomasulo:
Tomasulo Is Short (IBM)
Tomasulo Owns (JPM)

For Pip Coburn:
Coburn's Fund Owns (AAPL), (ANSS), (ADBE), (SY)
Coburn's Fund Is Short (PALM)

CNBC.com with wires