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Pro Traders: Bears About to Push S&P Sharply Lower?

On Tuesday investors flew into ‘sell first and ask questions later’ mode after a slew of negative catalysts emerged giving jittery investors every reason to run for the exits.

And at least some of the sentiment shift had to do with the latest calls from Goldman Sachs.

First the firm shook oil markets after its analysts called for the significant correction saying that the fundamentals did not support the recent run-up in oil prices; that too much of a risk premium was now built in.

Then Goldman called financials on the carpet with the firm's analysts slashing estimates on Morgan Stanley by 60% citing expected weakness in currency trading and investment banking revenue.

To maker matters more precarious, Japan raised the severity of its nuclear crisis on Tuesday to the maximum level -- on par with Chernobyl

How should you position now? What should you expect?

Instant Insights with the Fast Money traders

Tim Seymour does not think the sell-off is a one day event. He’s very focused on the technicals, specifically the outside reversals made by oil as well as commodity-related equities such as Freeport McMoRan and Alcoa. “These charts are telling us something. I think the market is concerned about growth,” he says.

He also points to the slew of upgrades in materials and in metals, which he takes as a contrarian sign. “The Street almost euphorically is running to upgrade these names.” He calls it a cyclical top.

In addition Seymour does not think the dollar continues its decline – generating yet another headwind for stocks.

Brian Kelly is also jittery. “If there’s any hint that global growth is slowing the market will (likely) get slaughtered,” he adds. He also points to the weakness in semi conductor stocks. Over the past year semis have led the broader market and they're struggling.

Although he's long-term bullish, Joe Terranova shares the caution in the near-term. He thinks a lot is riding on earnings and current expectations are high. “Nobody can really miss,” he says. He too is focused on technicals, which he considers “awful.”

Guy Adami is focused on the Vix. “It didn’t explode to the upside,” he says, “so maybe in the short term the S&P is near the bottom.”



#1 chart analyst Jeff DeGraaf is much more constructive on the market. He says the important level he’s watching is the 100-day around 1280. “I think we have to break below that before there’s a bigger issue. I’m looking for the market to collect itself around 1300 and then go higher."

DeGraaf considers this is a trend market not a momentum market. “Trend markets are characterized by 3 steps forward and 1 step back,” he says. “The right course of action is to use oversold conditions as a buying opportunity.”

Looking at one of the major market catalysts, veteran trader David Greenberg is convinced that speculators and not fundamentals are moving the price of oil and by proxy the market. He says “to have this kind of move in such a short amount of time with no fundamentals changing says a lot.”

Read More:
Algorithms, Not Demand, Driving Oil Prices Sky High?


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Trader disclosure: On April 12, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova owns (JPM); Terranova owns (C); Terranova owns (VRTS); Terranova owns (UPL); Terranova owns (TCK); Terranova owns (BAX); Terranova owns (XOM); Terranova owns (AKAM); Pete Najarian owns (AAPL); Pete Najarian owns (C): Pete Najarian is long (F) bonds; Pete Najarian owns (HPQ); Pete Najarian is long (XLF) call spread; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (NCRI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of DOMINO'S PIZZA UK & IRL
PLC

For Brian Kelly
Accounts Managed by Kanundrum Capital are long (MON)
Accounts Managed by Kanundrum Capital are long (SLV)
Accounts Managed by Kanundrum Capital are long (GLD)
Accounts Managed by Kanundrum Capital are long (EBAY)
Accounts Managed by Kanundrum Capital are long (EWP)
Accounts Managed by Kanundrum Capital are long (TSN)
Accounts Managed by Kanundrum Capital are long (VLO)
Accounts Managed by Kanundrum Capital are long VIX calls
Accounts Managed by Kanundrum Capital are long SPY puts
Accounts Managed by Kanundrum Capital are long wheat futures
Accounts Managed by Kanundrum Capital are long soy futures
Accounts Managed by Kanundrum Capital are long gold futures
Accounts Managed by Kanundrum Capital are short (SMH)
Accounts Managed by Kanundrum Capital are short (XLF)
Accounts Managed by Kanundrum Capital are short US bond futures

Brian Stutland
Stutland owns (EWZ), is long (EWZ) calls

For Jeff DeGraaf
DeGraaf Owns Crude Oil

Chris Varvares
**No disclosures



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