Halftime: 3 Signals S&P Decline Is Nearly Over

On Wednesday the Street was grappling with a deluge of scary economic data on the labor and manufacturing front, with investors struggling to determine what it meant for the market.

For example, the ISM number fell to 53.5 in May -- its worst since September 2009 -- from 60.4 the month before. Also, new data from ADP showed U.S. private employers added a scant 38,000 jobs in May.

In the wake of those results, Goldman Sachs, along with several other large firms cut their estimates for the all-important jobs number due Friday.

Investors went into sell first and ask questions later mode, sending the S&P sharply lower and the Dow down by triple digits.

Should you get defensive? Chris Verrone of Strategas tells Fast Money that's the wrong trade. He calls the defensive trade a crowded trade and says the market action is something bulls should feel good about.

Yup, feel good about!

”We’ve thrown every bad piece of economic data at this market and we’re only off 300 – 350 basis points from the April highs,” he says in a live interview. “When bad news doesn’t take us lower that’s good news.”

In fact, Verrone sees a number of signs that he thinks are downright positive.

- Bearish sentiment: A Reuters poll showed investors are the most bearish they have been since the third quarter of last year. And the AAII Sentiment survey hit a new short term high for the bears – a level that Verrone says has consistently marked the lows for the past 5 years.

- Copper: There’s been every reason for copper to break down through 380 but it didn’t, Verrone says. That type of resiliency, says risk in the market is ok. It's one of the most compelling aspects of this market, he says.

- Transports: Simply put, Kansas City Southern, CSX, FedEx, and UPS all acting well in the face of a lot of the uncertainty. Looking at previous correction, the one thing that has remained constant over the past few years is that transportation names have led the S&P out of a consolidation period.

As a result Verrone thinks the S&P doesn't have much further to slide. In fact, he thinks at 1300, pretty much all the weakness is priced into the market. “We think the market is fine.”

He counsels rotating into names that have been market leaders but recently corrected and are now at support.

Pete Najarian largely agrees. He’s watching the action in the Vix which has spiked in recent days, but remains relative low. “There is more concern on the Street but I wouldn’t call it panic by an stretch,” he says.

If you have a longer term time horizon, trader Zach Karabell is also bullish. “I wouldn’t call this a correction to end all corrections. For the past 3 months we’ve had wild swings. But (big picture) we’re in a fairly stable market that has been trending up and not falling apart.”

Trader Steve Cortes is on the other side. He points to yield on the 10-year which fell below 3% for the first time in 2011. “The fact that we are breaking 3% says we’re looking at slow growth and contained inflation. That’s a bad environment for growth stocks.”

Patty Edwards suggests if you want to play defense look at names “where there is global growth along with a dividend yield.”

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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; Cortes owns (SO); Cortes owns (EXC); Cortes owns (KFT); Cortes owns (K); Cortes owns (WMT); Cortes owns German Bonds; Cortes is short Nikkei; Cortes is short Australian dollars; Cortes is short Silver; Cortes is short EEM vs S&P long; Cortes is short (CAT); Cortes is short (DE); Cortes is short (CX); Karabell owns (AAPL); Karabell owns (GOOG); Pete Najarian owns (AAPL); Pete Najarian owns (C); Pete Najarian owns (MSFT); Pete Najarian owns (MS)
Pete Najarian owns (TCK)

For Zachary Karabell
River Twice Capital is short (SHLD)
River Twice Capital is short (CAT) puts
River Twice Capital is short SPY
River Twice Capital is short QQQ

For Patty Edwards
Edwards owns (AAPL) For Clients
Edwards owns (AMZN) For Clients
Edwards owns (GLD) For Clients
Edwards owns (GOOG) For Clients
Edwards owns (MSFT) For Clients
Edwards owns Canadian dollar via FXC

CNBC.com with wires.