S&P Clearly in Breakdown Mode, Maybe Not!

By most accounts, Tuesday was a tough day to be a bull. The Dow sold-off by triple digits and the S&P closed below its 200-day moving average, typically a negative technical sign.

The S&P has now traded lower for 7 consecutive sessions, the longest down streak since October 2008.

To make the situation all the more ominous, the sell-off accelerated into the close as volume jumped well above average. The fall was broad-based, with four stocks falling for every one rising on the New York Stock Exchange.

Anyway you slice it, Tuesday market action wasn’t pretty. Or was it?

With so many negative catalysts, Fast trader Guy Adami thinks investors may be missing something – something big.

The market didn’t close at just any level – it closed within a stones throw of flat on year and that may be significant.

“1249 is now the bogie,” he explains. The typically bearish market pro thinks the path of least resistance in the near term may in fact be higher – that’s right – higher.

”The last time the market hit this level the market ricocheted higher and there’s nothing to suggest it can’t happen again, especially if the market gets positive data on Friday,” he says. “It happened in March and again in June.”

And if that sounds like pie in the sky – Adami thinks another bull signal is emerging. “At 1249 we may be looking at a double bottom of the March lows.” A double bottom is typically a very bullish sign.

He says if the market holds 1250 don’t get in the way . "We could get a meaningful bounce off these levels," he adds. “Sell into that kind of rally and you’ll probably get your face ripped off."

If Adami’s right – that means buyers are about to step into the market. And that may not be terribly surprising considering “equities are at their relative cheapest valuation in 36 years,” adds trader Stephen Weiss. But Weiss is skeptical, he says, “the question become will stocks get even cheaper?”

Top hedge fund manager Anthony Scaramucci may be among the buyers who step in – he thinks stocks are getting too cheap to pass up. “I think the market is very attractive here,” he says. If you have a longer time horizon Scaramucci suggests looking at the cyclical industrials.

And if you’re looking for a fundamental reason to buy, trader Brian Kelly says he wouldn’t be surprised to see some form of QE3 down the road. “The Fed wants people to feel more wealthy," he explains, "and the breakdown in the market could give them a reason to try something new.”

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Trader disclosure: On Aug 2nd 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 (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (F); Terranova owns (CVI); Terranova owns (IBM); Terranova owns (FCX); Scaramucci owns (C); Scaramucci owns (GOOG); Scaramucci owns (MS); Scaramucci owns (WMT); Scaramucci is long the U.S. Dollar; Weiss Owns (TBT); Weiss Owns (JPM); Weiss Owns (QCOM); Weiss Owns (DVN); Weiss Owns (COP); Weiss Owns (KO); Weiss Owns (MDRX); Weiss Owns (SLV); Weiss Owns (VZ); Weiss Owns (NS); Weiss Owns (ETP); Weiss Owns (SDS); Weiss Owns (TWM); Weiss Is Short (X); Adami Owns (AGU); Adami Owns (C); 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
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 Building Materials Holdings
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Virtus Investment Partners Owns More Than 1% Of Domino's Pizza UK & IRL PLC

For Brian Kelly
Accounts Managed By Brian Kelly Capital Own (TLT) calls
Accounts Managed By Brian Kelly Capital Own (GLD) calls
Accounts Managed By Brian Kelly Capital Own (SLV) calls
Accounts Managed By Brian Kelly Capital Own (FCX) calls
Accounts Managed By Brian Kelly Capital Own (NLY
Accounts Managed By Brian Kelly Capital Own Australian Dollar
Accounts Managed By Brian Kelly Capital are short the U.S. Dollar

For Anthony Scaramucci
SkyBridge Capital Is A Fund Of Funds Manager
Funds Held May Or May Not Own The Recommended Securities
Scaramucci Is One Of 8 National Finance Chairs For Mitt Romney Campaign
Scaramucci held a fundraiser for Mitt Romney

For Alexandra Lebenthal
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For Dana Telsey
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CNBC.com with wires.