As Spain Drags Stocks Lower, Pros Watching Key S&P Level

The S&P closed lower on Wednesday as investors again worried that overseas financial woes were about to send stocks on another wild ride.

Largely investors were spooked by the violent protests in Madrid, in which people opposing the latest austerity measures clashed with police.

Wall Street interpreted the demonstrations as a sign that the people of Spain may not go along with the proposed tax hikes and spending cuts in the new budget, even though they may be necessary for solvency.

In turn, investors went into sell first and ask questions later mode.

Will concerns about Spain and the potential ripple it could generate take down the stock market in the US?

Fast Money traders Brian Kelly, founder of Shelter Harbor Capital and Guy Adami, managing director of, both suggest watching the technical action in the S&P as a ‘market tell.’

“As long as the S&P holds 1425, I remain bullish,” says Adami. “That was resistance and it should be support.”

“We rebounded off 1425 on Wednesday,” adds Kelly. That too is bullish.

Kelly sees the September rally as a QE3 induced rally and although there are negative fundamentals in the market such as lower forecasts from FedEx and Norfolk Southern, he thinks the bulls will continue to dominate as long as the S&P holds above 1425.

"The market has been looking past FedEx and Northern Southern," concurs Adami. "It's continued to rally."

Another way of saying it, “If 1425 holds then the QE3 rally continues,” says Kelly.

Posted by CNBC's Lee Brodie

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