NEW YORK (TheStreet) -- The S&P 500 erased its prior two-day rally, falling 2.09% on Thursday.
On CNBC's "Fast Money" TV show, Brian Kelly, founder of Brian Kelly Capital, pointed out that there was a large sell order in the S&P 500 futures market around 3:30 a.m. EDT. He thinks this may have fueled Thursday's selloff.
Steve Grasso, director of institutional sales at Stuart Frankel, suggested the selloff could've been caused by a market unable to make new highs, causing investors to take some profits in their winning stocks.
Tim Seymour, managing partner of Triogem Asset Management, said the global economy still looks good. He added that investors continue to rotate out of highly valued stocks and into low-value stocks.
Guy Adami, managing director of stockmonster.com, said one of two possible scenarios that will play out: Either the S&P 500 will "tread water" for several weeks and sell off into the end of the month or the S&P 500 will sell off hard over the next week down to roughly 1,765 before rallying for the rest of the month.
Grasso pointed out the S&P 500 finally pulled back to the 100-day simple moving average. He added that if the market can hold near 1,800, he would be a buyer.
Dennis Gartman, editor and publisher of The Gartman Letter, said he remains "neutral" on U.S. equities at current levels. He added he would not consider selling short the broader market and reminded investors it's still a bull market despite the pullback. He thinks the S&P 500 could pull back to the 200-day simple moving average near 1,765, representing a 7.5% pullback from the highs. He also likes gold at current levels.
Adami is a buyer of Boeing (BA) - Get Boeing Company Report and expects the company to have a good earnings report later this month. He is also a buyer of Blackstone (BX) - Get Blackstone Group Inc. Class A Report and Newmont Mining (NEM) - Get Newmont Goldcorp Corporation (NEM) Report.
Grasso is a waiting for a deeper pullback to start buying stocks he likes.
CNBC's John Jannarone said hedge funds may be exacerbating the selloff in certain stocks because many firms are usually long similar companies. When the firms all sell out of their positions, it hurts the stocks much more than what's reflected in the broader market. Of course, this can create buying opportunities too, but usually in more quality stocks, he concluded.
Adami said the biotech sector has sold off to the point where it's almost time for investors to buy.
David Trainer, managing partner of Novo Capital, said Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report should be trading at $100 per share, based on its fundamentals. He pointed out the company grew revenue 17% last year while expenses increased 23%. He argued the stock has finally lost momentum and looks to be headed lower.
Kelly said it's hard to short-sell momentum stocks after they have already had a big selloff.
Adami agreed, saying he would not look to short stocks that have a large short-interest. Instead, he was a seller of International Business Machine (IBM) - Get International Business Machines (IBM) Report and Caterpillar (CAT) - Get Caterpillar Inc. Report.
Seymour said earnings expectations for this quarter seem "reasonable." He added that financial stocks have very low valuations. Specifically, he likes J.P. Morgan (JPM) - Get JPMorgan Chase & Co. (JPM) Report ahead of earnings.
Carter Braxton Worth, chief market technician at Sterne Agee said the S&P 500 could pull back to the range of 1,520 to 1,675. He argued that the broader market is just beginning to roll over and more pain is on the way. He suggested the rotation into low-valuation stocks will eventually stop but the selling will continue, driving down the indices.
Kelly advised investors not to be afraid of buying stocks if there is a 10% to 15% pullback.
Seymour reminded investors the economy is still doing well and the industrial and materials sectors remain strong.
Whole Foods Markets (WFM) dropped 4% and was the first stock on the show's "Pops & Drops" segment. Grasso said investors could take a small position in the stock with a stop-loss at $49.
Tesla Motors (TSLA) - Get Tesla Inc Report was the featured company on the show's "Street Fight" segment. Grasso said the stock is a buy near $205 based on its technicals. He added the company is expanding its international and domestic exposure, introducing two new vehicles -- the Model X and the Model E -- and is creating the Gigafactory, which will be a "disruptor."
Seymour disagreed, arguing the stock will be cash-flow negative for the next two years. He added that even if the company can grow its production tenfold by 2020 (based on its current valuation), it will still only represent 0.6% of the global auto sales. He argued the stock has lost momentum and competition will increase in the electric car space.
Adami said Tesla failed to hold the $225 level and looks to be headed lower.
Kelly said he will consider buying Tesla near $175.
Larry McDonald, senior director at Newedge, said a lot of companies have been lowering investors' expectations, only to surpass them come next earnings report. He added that before the market sold off it worked well to buy the stocks on earnings-related warnings and sell after the report.
Two stocks that may do well are Urban Outfitters (URBN) - Get Urban Outfitters, Inc. Report and First Solar (FSLR) - Get First Solar, Inc. Report, he suggested. He also said biotech stocks are due for a short-term bounce.
Seymour said he felt "comfortable" that earnings expectations for the quarter are being lowered.
Grasso said he will look to see how retail companies do in the upcoming quarter.
For their final trades, Kelly was a buyer of the United States Natural Gas ETF (UNG) - Get United States Natural Gas Fund LP Report and Grasso was a buyer Hewlett-Packard (HPQ) - Get HP Inc. (HPQ) Report. Seymour said to take profits in the iShares MSCI Emerging Markets ETF (EEM) - Get iShares MSCI Emerging Markets ETF Report and Adami was buying Big Lots (BIG) - Get Big Lots, Inc. Report.
-- Written by Bret Kenwell in Petoskey, Mich.
Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter.