Pro Traders: Message Amid the Market Mayhem?

On Wednesday chatter on the Street had everything to do with how much more selling was ahead after the S&P recorded its worst 1-day decline since August.

All 10 Standard & Poor's sectors ended more than 1 percent lower with banks the worst of the bunch. Also, all 30 stocks in the Dow industrials closed in negative territory.

The selling was largely triggered by new economic data which sent investors into a tizzy, as they interpreted the results to mean the recovery had completely lost traction.

For example, the ISM number fell to 53.5 in May -- its worst since September 2009 and new data from ADP showed U.S. private employers added a scant 38,000 jobs in May. Also, Goldman Sachs, along with several other large firms cut their estimates for the all-important jobs number due Friday.

Looking at the technicals, the results weren't any more promising. Wednesday's decline took the S&P through its 50-day moving average, leaving the market vulnerable to more losses.

"I expected that the S&P would be able to hold onto 1,331 or 1,324," says Roger Volz, director of cash equities at BGC Financial in a Reuters interview. "The fact that we keep moving deeper into a corrective mode ... puts us on the sidelines for Friday."

What should you make of the action? How should you position now?

Instant Insights with the Fast Money traders

Joe Terranova remains reasonably optimistic. He thinks investors are looking at a slow down but not a meltdown. He expects to see a similar pattern from last year, "a repeat of 2010," he says. In other words he does not think the S&P has put in a high for the year. "The market should come back in the second half," he says.

Karen Finerman believes that the recent weakness is largely the unwind from window dressing that occurred during the final days of May. However she also says, “I can’t ignore the parade of bad economic data. I’m getting concerned the economy is slowing.”

Tim Seymour is more skeptical. He doesn’t like that the S&P closed below the technically important 50-day. “I think we could test 1295,” he says. And looking at the fundamentals he thinks we may be facing a synchronized global slowdown. That’s a big problem considering central banks overseas are looking to hike.

Like so many investors Guy Adami is caught between a rock and a hard place. He sees plenty of reasons to turn bearish. First he points to the financials , which he calls awful for the past 5-6 months. “I don’t think we can have a significant rally unless financials catch up and I see no indication that they are.” And Adami is also skeptical of commodity related stocks such as Freeport and Deere . – “Deere is down $17 very quietly – I think that’s telling,” he says.

Nonetheless, Adami admits that investors have seen this movie before and lately it ends with the market ripping higher. “Price is truth,” he says again. All told, Adami thinks its more likely in the near term that the S&P trades in a range, with 1325 being resistance and 1300 becoming support.

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Trader disclosure: On June 1, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by “Fast Money” traders; Accounts Managed by Brian Kelly Capital own (ANDE) calls; Accounts Managed by Brian Kelly Capital own (BHP); Accounts Managed by Brian Kelly Capital own (IAU); Accounts Managed by Brian Kelly Capital own (NLY); Accounts Managed by Brian Kelly Capital own (NEM); Accounts Managed by Brian Kelly Capital own (TLT) calls; Accounts Managed by Brian Kelly Capital own Aussie dollar; Accounts Managed by Brian Kelly Capital own Canadian dollar; Accounts Managed by Brian Kelly Capital own Swiss franc; Accounts Managed by Brian Kelly Capital own Hong Kong dollar; Accounts Managed by Brian Kelly Capital own Mexican peso; Accounts Managed by Brian Kelly Capital own Swedish krona; Accounts Managed by Brian Kelly Capital are short yen; Terranova owns (XOM); Terranova owns (KSS); Terranova owns (CVI); Terranova owns (OXY); Terranova owns (TM); Terranova owns (BJ); Terranova owns (DIS); Terranova owns (PFE); Terranova owns (V); Terranova owns (HPQ); Terranova owns (FLX); Terranova owns (JPM); Terranova owns (MCD); Terranova owns (PEP)
Terranova owns (VRTS); Terranova is short (DELL)

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MIke Khouw
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Joe LaVorgna
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