Adami. The selling is widespread with the dow dropping more than 800 points all 11 s p 500 sectors finishing the day in red the market meltdown leaving investors on edge and sparking fears a recession could be on its way. What is your take on the day, guy adami . My take on the day is it makes a lot of sense volatility is here i think volatility will continue to grind hard. Pete can speak to this when is it over . Thats what everybody wants to know so i can pontiff indicatic. We are looking for a vix that climbs to 30, we have seen it peak out before. Or you are looking for the s p 500 to put in a low of 2690 or so, which is midway between the low we saw december 24th and the recent high in the s p 500 of 3025 carter will be on and im sure speak to levels, but those are the things you are looking for in terms of it doesnt make sense, i think it makes sense and i will say this as well. The gold market has been telling you Something Like this has been in store for the last few months, mel. The data around the world, negative yields around the world have been telling you the same story. Tim, we got a dose of very bad data that started us off on the wrong food. The data continues to get worse and guy talks about what he needs to see different. Unfortunately, i think were in a case where the data while the leading indicators 12 to 15 months ago started to give way. It is hard to say that the data is anywhere close to troughing, especially when we havent begun to solve the trade disputes or trade restrictions which continue to be the dynamic you have japan to be watching, tomorrow we have retail sales in the united states, an empire state survey, a lot of surveys we have seen multiyear lows, hong kong obviously with the extreme case but, again, yesterday you saw german confidence indicators at 2011 area. That to me is a market where we didnt have any confidence so i need to see data change you are right, it is the data that led us lower. Yes and then you pile on top of that what secretary ross told squawk box this morning that effectively the september trade talks we thought were coming with the chinese coming to washington, d. C. , nothing has been formalized yet. Not so much. If we thought it was a catalyst, we dont know if it is going to happen at this point. Yesterdays rally we had was on the trump news with china, maybe progress there i was surprised how strong the rally was because how many times are they going to play this, oh, there will be a deal, there will be a deal . This has been now we are coming up with a year when they first started tariffs. Maybe they will start talking, maybe they wont i dont think we can rely on it. To me though, i mean there was a lot to hate about today. It didnt seem that ultra pan y panicky until the end. It started to sell off at the end. I dont know what to make of it all except, you know, the market is down 2. 6 for the week. It is not that much off its alltime highs yet this action between monday and yesterday and today, the net of that being down 2. 6 is much worse than that, right ceos, they get uncomfortable as investors get uncomfortable. Consumers get uncomfortable. Consumers get uncomfortable looking at this kind of volatility so thats not great. You dont want to have a sort of selffulfilling prophecy of fear begetting contraction. I dont know what to do here im not a buyer. Normally i would say things trade down in integers i have a list but im not close to buying today. Waiting a lot of people make the argument most americans are not in the stock market so they wont feel the pain. But they see a headline in the newspaper, dow down 800 points. They will call their broker or wherever their money is. We know the chinese economy is slowing down from where it had been, so powerful until now. Then you hear the german news. The more people understand about the market and read the headlines the more scared they obviously will get i think we already know, this Algorithmic Trading moved to the upside on tuesday when we went up 400 points like we went down 400 points on monday today is the same thing. These are algorithms hitting and theyre flowing to the down side theres all of the headlines in the world you could use to trigger some of the moves to the down side. You mentioned volatile just last week actually, on monday we had huge buying of the january 30th strike calls in the vix. Now, they were right last time when they were buying huge amounts of volatility index calls, and now are they going to be right again by the way, it doesnt mean it has to go to 30. It just means they are seeing upside and those volatility options could move very, very rapidly, mel, to the upside. Right. If we get up towards 26, 27, theyre moving it doesnt have to go through 30 thats what people forget so much of the time well, they bought the 30s, it has to go to 30. No, it doesnt theyre just buying something they valued and they said, you know what . Were going to own this because we think this is going to happen when you look at all of this right now, theres Different Things we were seeing put buyers, more so than i have seen in a long time, and i talked about it earlier but i will bring it up eem, 60,000 puts were rolled from august into september, and they went down from 40 1 2 to 37 1 2 they are expecting the eem, led by china, to go lower than it is even today theyre expecting even more to the down side. All right so all day long weve been talking about the source of the selling, and it was the inversion of the yield curve. Yes. Theres huge debate whether or not it indicates we are going to be in a recession or not. Does it matter at this point if that is the indicators for a recession . Were always looking for reasons to identify why things happen i understand, you want to be able to label it happened for these reasons, i totally get it. Obviously, today specifically those headlines matter but go back and i will say it again, go back and look at the way facebook reversed after they reported earnings. That was 215 or so dollar stock, look where it is now same thing happened with amazon. Effectively, although not entirely the same level, apple has done very similar move to the down side. My point is theyre big, huge stocks that sort of led this now, we will talk about the inverted yield curve yes, obviously it is not a great thing. The bulls will say it is different this time. Im not certain it is the case quickly in terms of what people say about consumer confidence, you just said it we will have a special tonight the evening news will lead with dow down 800 people will see it for a couple of days and they will say, maybe we shouldnt be getting that starbucks. When 70 of the economy is driven by consumers and the consumers flinch, it is a problem. I dont know what camp i want to be put in i will speak for the bears right now and say it is right. Three months out to ten has been inverted since may so to be clear, that tells you a market that really thinks the fed, to oversimplify it, the fed is really off sides because the fed is controlling the shortened of the curve at this point if you think about what a lot of talented strategists have come on our show to tell you is that when you have an inverted yield curve, you have anywhere from 12 to 18 months where equities can can we show that graphic . We have the data behind it. We should do that. Great. The bottom line is in a normalized yield curve environment, which theres no such thing as a normalized year old curve environment, you have periods where equities can continue to outperform until the teeth of the recession kick in the bottom line is that was never going on with tenyear bunds at minus basis points. That was never going on. You have a dynamic here which we have never seen. I get back to what i say the market is behaving, the bond market is behaving as if we have black swan risk, that we have three standard deviation risk goes and the moves in the bund market have been three standard deviation moves. They dont go away quietly. It wasnt happening when the fed had so few bullets left to use if there was an actual recession on the horizon. Yes i mean it is amazing what is the next step to the thing . Are they putting themselves into or theyve been put into a corner by the president who is continually just coming after them and after them and after them, mel. I will bring up one last thing this gold run we have seen, it has been going on for a while. I see a lot of gold bulls suddenly coming in saying, hey, i think it is time to buy gold by the way, this started in may. The l db was 120, now it is 143. 52week highs. Slv, 52week highs today theres been some running thats already happened into this so i just want people to understand that, hey, look, are you buying a top im not saying it is the top, but im saying it is something thats been going on now for at least a month, in some cases two or three months. And to keep an eye, you have to be disciplined i took off all of my gtx today because ive been overexposed in these metals i dont want too much exposure there because at any moment if we get any kind of positive news in the market, i think well start to see the gld and the gdx and the slv, all of that start to pull back, if we see a big positive. Pete mentioned the fed. President trump actually ripped the fed during todays selloff, calling the central bank clueless lets bring in Steve Liesman with that. Steve. Reporter as you have been talking about it has been a consistent theme for the president to criticize the Federal Reserve nearly every day, but especially when there are big market selloffs what he does not blame are his own trade policies which economists believe are weakening and looking to consistently be the market volatility. I will read you the tweet with the caution that it often contains significant misstatements. We are winning big time against China Companies and jobs are fleeing. Prices to u. S. Have not gone up, and in some cases have come down china is not our problem, though hong kongst not helping. Our problem is with the fed. Raised too much and too fast now too slow to cut. Spread is and i suppose he means here the spread between the u. S. Yields and foreign yields is way too much as other Companies Say thank you to clueless jay powell and the Federal Reserve. Germany and others are playing the game crazy yield curve. We easily should be reaping big rewards and games but the fed is holding us back. We will win. The fed has typically not responded to any of the president s criticisms but for china and the u. S. To continue talking, there were no new tariffs on the table at the time if there is a recession, here is how the fed could respond. Cutting rates would be an obvious thing. Perhaps surprising, the market would get a little bit more effect to it it could obviously restart quantitative easing. It just ended tightening at the last meeting of course, theres the possibility, which some folks are talking about, of a reverse twist. You remember during the financial crisis, shortly after, the Federal Reserve acted to reduce yields on the long end. They could take operations to raise yields and reinvert the curve. I will say with caution that i have not had any support not heard any support from fed officials on an idea of actually targeting the yield curve. We will get a sense next week at jackson hole just how seriously the fed takes the issue, an extent to which it feels a more urgent response may be needed. Melissa. Steve, joe was mentioning a 75 basis cut at the september meeting. You are shaking your head. I said maybe 50, and joe one ups me on the 75 if you want to surprise the markets, right, you cant go 50. 50 is sort of what is expected. It is what is expected, right . Right. Look, i think theres reason for the Federal Reserve to be cautious you guys on the desk are smart enough to understand that the differential on real yields is far less than the differential on the nominal yields with foreign banks. If you were to look at it, i think i looked at it this morning, it is about a 60basis point differential because european inflation is so much lower than u. S. Inflation. So theres not that much to go, not that much difference between the two. The fed, of course, can surprise and can use rates. The question is do you use your ammunition before youre sure that it is really a very serious downturn as the markets expectsing here. Why wouldnt the fed want to target a specific part of the yield curve . It seems like it would be so surgical and could be effective in uninverting the curve. So theres a long tradition of the Federal Reserve targeting the shortened and using the one tool it has, the funds rate. It stepped, i guess you would call it, out of bounds here, out of its normal role during an extreme moment when there were real problems and the Federal Reserve was desperate to try to kickstart the economy and used operation twist, for which there are really mixed reviews i think the fed really it is probably almost ridiculous to say this the fed wants to get back to its knitting of controlling the curve using the short end and using bonds. It wants to sell mortgages i think one of the things thats happening here is that the feds dreams of getting back to normal are sort of going up in smoke. Yes, it seems that way. Steve, thank you so much pleasure. Steve liesman lets trade this tim, what do you think well, steve is pointing out that you have a dynamic where the fed certainly has a tool box it can go to, but the question is if we look at Central Banks has any of it actually worked. The good news is europe has a bigger spiral, showing people are looking at the relative trade which favors owning u. S. Tenyears over german. One part we havent spoken about the risk dynamics tonight is we havent talked about the dollar, which to me is reasserting strength and is a bigger concern, because the next leg to fall is that emerging market currencies come under attack that is something we have seen multiple times throughout crises that have not necessarily by the way ended in emerging markets but ended up there. Makes sense pete talks about being disciplined in the gold market i get it and hes right. This has been going on for longer than he each mentioned. The gold markets had the stealth rally he is talking about. With that said, it goes right back to the gold market. I will say this and im not an economist and i will say it all the time, but theres a mythology that show lowering rates magically makes economies do better. Tim alluded to this. It isnt working that well in europe and clearly it didnt work all that well in japan. My push back would be just because everybody else is going down that rabbit hole, why should we . I dont understand why it is the right thing to do. Quickly, in 2011, july of 11, then citizen trump was talking about the fed keeping rates low, creating huge asset bubbles. He was right then. Im not sure what changed in the last eight years. We have full coverage of the selloff be sure to catch the special report markets in turmoil tonight at 7 00 p. M. Eastern time up next, more on the mega market meltdown. Where he sees a mancz market about to burst plus, where stocks are headed following todays massive selloff live from towns square in new york city. Much more fast money right after this your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. Healthier brain. Better life. Mno kidding. Rd. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Welcome back to fast money it was a brutal session on wall street today the dow having its worst day of the year and crossing below the 200day moving average for the first time in more than two months joining us by phone is Cornerstone Macro head of Technical Analysis carter worth. Carter, now that the belowthekey level, where do we head next . Sure. So i mean i think it is important to know that the dow spent as much time above as below in the sense that moving average is really what is considered an automated trend line if you are trending, it really matters, if you are in a steep up trend or down trend what we know is that the market has not been trending. It has been stalling for the better part of 18 months while we went above and below the key levels, the internals keep slipping. By all accounts one has to say the june lows are in play. If you were to go down for instance as much on the dow today tomorrow, you are getting into those levels. Now were not much worse than we were on mondays low a week ago. So the initial plunge that 6 fell off in four or five sessions and we have been backing and filling. We popped yesterday, news. Now we have given it back. The churning i think is a normal process for the market as the individual securities continue to weaken. Thats the issue the trouble like this never comes out of nowhere s. Has been brewing. We know that european banks have been making lows two and three, four years, japanese banks, and yet the optics of the s p was always the illusion, whereas every other aggregate, mid cap, small cap, transports, never were confirming and now it is all coming out in the wash. Okay. So lets get to levels, carter, and home in on the s p 500 you said new lows. You are saying we are going to test december lows so that would be, what, 2347ish for us to go to the june low, thats 2728, we close at 2,840, you can do it in an instant, that would be another 3. 8 from here but ultimately, and the big subject is if, indeed, the december lows are in play, right, which is the 2,350, plus or minus level, this will all come out as being nothing but a bear market rally. We were never in the new bull and thats what the divergence was always saying. Carter, thanks for phoning in on a day like today. You bet thanks, guys. Lets trade it. Show of hands. Oh, i love the show of hands. Thats a great game it is not quite a game, you put your hand up if you agree. Will we test december lows by when in what time frame, melissa in the next six months. We, 2,350 in the next six months. I mean i know about six months ago we were at the lows. Okay. Lets play the game. Say 50 50, were split on the desk lets just say. You know, it is interesting are you hold on. Where are you ill be with pete. Okay