On Tuesday traders on the floor were starting to question the sustainability of the broad bull rally as the S&P took a sharp turn lower and the Dow tumbled by triple digits.
Again Europe’s financial woes sent investors running for the sidelines; this time chatter suggested Greece may not meet a looming deadline. Just one day earlier,China cut its growth forecast, triggering concerns that the era of China as a great global growth engine was drawing to an end.
Pullbacks are usually considered healthy, but with these new and somewhat bearish developments, how long should you wait until you pull the trigger?
According to top hedge fund manager and Fast Money trader Simon Baker - wait until the S&P trades down to 1300. However at that level, hit the buy button. “I think the pullback is an all- round healthy thing," he says. Baker believes the market just got ahead of itself - nothing more.
Traders Patty Edwards is also bullish - relatively. ”I’m relieved to see the pullback,” Edwards admits. “We got overextended – the market went too far too fast. I think there's more pullback to go -but once it comes , I'd also get back in and start buying again.”
The downdraft in the market could abate sooner rather than later if trader Jon Najarian's comments pan out.
He thinks there are two catalysts coming this week that will surely influence the market and could potentially reverse the negative momentum. “There’s an Apple event on Wednesday and of course employment data on Friday,” he says.
In other words, depending on the specifics, the jobs report and the Apple event – could give bulls new reasons to resume the rally.
If you’re looking for a tell, Jon’s brother Pete Najarian suggests watching the Vix . “Right now it’s spiking – and for the first time since Feb 15th the Vix is over 20,” he says. “However last time we got to these levels, it didn’t last long.” If the Vix falls as quickly as it spikes – Najarian would take it as a sign that there’s not a lot more fear in the market.
What do you think? We want to know!