NEW YORK (TheStreet) -- The S&P 500 looked like it would close higher or at least be flat on the day, but that changed in the last hour of trading with a big drop Tuesday. The index now seems destined to trade down to 1,950, Guy Adami, managing director of stockmonster.com, said on CNBC's "Fast Money" show.
He said the iShares 20+ Year Treasury Bond ETF (TLT - Get Report) may take out its 2012 highs near $131. "Rates are going significantly lower," he added. The S&P 500 is likely to languish near current levels, agreed Steve Grasso, director of institutional sales at Stuart Frankel. Investors should wait for the index to fall to 1,950 before considering getting long.
Ever since oil prices broke below $65 per barrel the S&P 500 has matched it by moving lower. If crude can stabilize and rebound to the $65 level, the S&P 500 will likely follow suit with a rally of its own, Grasso said.
Tuesday's price action in the S&P 500 looked like the classic intraday reversal that has signaled the bottom of so many recent pullbacks, said Tim Seymour, managing partner of Triogem Asset Management. However, the index gave up those gains and closed near the lows of the day, giving way for even more volatility in the not-so-distant future. The index could drop to 1,920, he said.
The Federal Reserve's FOMC meeting is Wednesday. If the central bank hints at a rate hike in 2015, it could put upward pressure on the U.S. dollar, which, in turn, would put downward pressure on crude oil, according to Dan Nathan, co-founder and editor of riskreversal.com.
He also said investors should avoid the Market Vectors Russia ETF (RSX - Get Report) , which rallied some 20% off its morning lows, before pulling back slightly. Usually the first big move higher isn't the best time to buy, he cautioned. Seymour added Russian stocks are currently near long-term support. However, oil prices have been weighing on the Russian stock market, so until crude stabilizes, that market will continue lower.
Seadrill (SDRL) didn't make a new 52-week low, Adami pointed out. The stock finally has an attractive risk-to-reward opportunity on the long side.
Less than 1% of iPhone shipments go to Russia, said Steve Milunovich, managing director at UBS, who has a buy rating and $125 price target on Apple (AAPL - Get Report) . The strong U.S. dollar may negatively impact revenue by 3% to 4%, he said. In the short term, strong iPhone 6 Plus demand from China -- which makes up most of Apple's emerging market business -- should offset some of the currency woes.
Turning to International Business Machine (IBM - Get Report) , Milunovich said the stock is oversold and likely near a bottom. He isn't optimistic on the business, saying it will take several years for it to turn around. The company's emerging market business makes up roughly 15% of revenue, which will be a headwind.
David Hilder, senior research analyst at Drexel Hamilton, called Citigroup (C - Get Report) his top pick in the banking group. The company is likely to raise its dividend and buyback plan in March and doesn't have that much exposure to Russia. In general, the banks would benefit from a move higher and stabilization in short-term rates.
Wait for a pullback to $50 to get long Citigroup, Seymour said.
Stick with the winners in the financial sector, Grasso said, advising investors to buy Wells Fargo (WFC - Get Report) . Nathan said he is short the Financial Select Sector SPDR ETF (XLF - Get Report) via put spreads. It makes for a cheap hedge in case the financials pullback, he reasoned.
For their final trades, Seymour is buying China Mobile (CHL) and Nathan is selling the iShares 20+ Year Treasury Bond ETF. Grasso said to buy Delta Air Lines (DAL - Get Report) and Adami is a buyer of Spirit Airlines (SAVE - Get Report) .
-- Written by Bret Kenwell