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Halftime Report: Will Bulls Or Bears Wrest Control Of Market

It seems like stocks were going nowhere fast on Friday afternoon with both the Dow and S&P trading in negative territory, but without conviction. The bears and bulls have been battling for control of the market since stress test results were announced last week.

Bears are looking for the next leg down while bulls say the stock market is pricing in a V-shaped recovery. “I think we rally into the summer, there’s a lot of support in the S&P,” says Kevin Cook of Mark2Market on CNBC. “It could go to 950 and maybe 1000.”

Should you bet with the bulls or the bears?

Instant Insights with the Fast Money Traders

As far as I'm concerned oil takes the temperature of the global economy and it’s ticking lower, reveals Fast Money trader Joe Terranova. It can’t establish momentum above $60.

That suggests weakness. Looking at the broader S&P, we had 9 consecutive weeks where the overall market has settled in the upper end of its weekly range. This will likely be the first week where the dynamic changes where the market closes in the lower part of the range. That signals that the recovery is stalling out and we could move into a congestion phase.

But don’t forget that Friday is expirations day, reminds Brian Stutland of Stutland Equities. It’s not atypical to see a little pull back. And I like oil in the $50 range.

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TOPPING THE TAPE: TRANSPORTS

It seems that investors aren’t dissuaded from placing bullish bets on railroads and other forms of transportation. The Dow Transports bucked the negative tape as investors bid this part of the market higher as an early beneficiary of economic recovery.

The Transportation Average is staying above 3000, explains Dan Fitzpatrick of StockMarketMentor.com, which is a bullish sign. And one of those components is Burlington Northern, which is bouncing right off support. As a result I think it’s a buy.


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CONSUMER STOCKS

New data shows consumer confidence snapped to its highest level since last September, before the failure of Lehman Brothers. The positive sentiment stems from expectations the economy may be in the last stages of the recession, says the Reuters/University of Michigan Surveys of Consumers.

However, JC Penney warned Friday that it expects consumer spending to stay weak and the department store forecast second-quarter and full year results below Wall Street's expectations.

How should you be trading?

The data isn’t great but it’s better than what we’ve seen, explains Deutsche economist Joe LaVorgna. Still I’m cautious.

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OPTIONS ACTION: INSURERS UP ON TARP CASH

Shares of several life insurers, including Hartford Financial and Lincoln Financial Group , rose on Friday after the companies got a preliminary green light to participate in a U.S. funding program.

Hartford and Lincoln announced late on Thursday they could receive $3.4 billion and $2.5 billion, respectively, from TARP.

There’s been a lot of speculation that this news was coming and stocks would pop on the news, explains OptionMonster Jon Najarian. It wasn’t completely unexpected. But there’s was an unusually large volume of options action in the space yesterday and now the smart money is already out. That timing seems suspicious to me.

If you’re in this trade I would close out my position by selling in the money call options, Najarian counsels.

I’d be flat, counters Joe Terranova. Sometimes the best move is to do nothing.


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Trader disclosure: On May 15th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;

Terranova Owns (IBM)
Terranova Owns (DELL)
Terranova Owns (INTC) & (INTC) Calls

Stutland Owns (HPQ)

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