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Halftime Report: Can Stocks Sustain Their Gains?

Both the S&P and Dow slipped lower Thursday after so-so retail sales numbers and lackluster results from Cisco put a lid on the rally.

Although Cisco Chief John Chambers said business conditions were improving for the world's largest network equipment manufacturer, he also said it was too soon to call a recovery.

Those comments overshadowed any optimism sparked by positive economic data, which showed a sharp fall in the number of workers filing new claims for jobless benefits.

With the all important jobs report due on Friday, will 1,000 on the S&P stick?

Instant Insights with the Fast Money traders

It seems investors are in a holding pattern as they wait for employment figures on Friday, muses OptionMonster Jon Najarian. The whisper numbers are slightly better than expected and I think that's what's holding the market steady.

I also think investors are waiting to see if there will be a strong selloff or just a consolidation before thay make any moves, adds Jeff Tomasulo of SMB.

Personally, I think the market is a bit overbaked, adds Jared Levy of Peak6. I’m seeing a lot of put buying, which suggests to me that investors aren’t feeling confident with the S&P at this level. And I’ve got to admit, I’m not so sure myself.

Patterns in the charts suggest that the S&P could back and fill down to around 948, explains Greg Troccoli of Opalesque. But that doesn't worry me. Only if it goes below that level will I start to worry.

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'DASH FOR TRASH' LIFTS BEATEN-UP FINANCIALS

Shares of battered financial companies including insurer American International Group and lender CIT Group continued to soar on Thursday, as investors rushed to buy shares to cover short positions in the companies.

However there could be a fundamental story at play too, reminds host Melissa Lee. AIG reports quarterly earnings on Friday and a new CEO takes up the company's reins on Monday.

What’s the trade?

I would take profits in AIG, counsels Jon Najarian.

For a short term traders, a lot of money has been made in AIG, adds Jeff Tomasulo. But this trade is only for professionals.

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SELECT RETAILERS UP ON SALES DATA

Retailers reported their 11th straight month of sales declines in July, as shoppers continued to search for bargains and basics in the downturn.

Rising unemployment, cool weather and other factors kept shoppers at home or buying just what they needed last month, rather than stocking up heavily on back-to-school items.

Still, chains including Macy's and Gap gave upbeat profit forecasts even though sales fell, as they discounted less merchandise and cut costs, and margins improved.

What’s the trade?

It seems to me retail is a story of rotation, says Jon Najarian. Consumers are spending it’s just not always in the same stores. Next month we could see some strength in Pacific Sun and Hot Topic, as they attract the back-to-school crowd.

If you’re looking to play retail, I’d do it by taking a long position in Walmart, counsels Jared Levy.

The charts suggest to me that Walmart is going lower, counters Greg Troccoli. I’d play it short; I think Walmart goes down to the $40’s.

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TRADE TO GO: INSURER PLAY

Jon Najarian suggests putting Hartford on your radar. An unusual volume of call buying suggests this stock could go higher.

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CALL THE CLOSE

Jeff Tomasulo: I’m cautious ahead of the jobs report.

Jared Levy: I’m leaning to the short side.

Greg Troccoli: I’m a seller of the broad market.

Jon Najarian: I’m a buyer.


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Trader disclosure: On Aug 6th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (AA) Call Spread: Najarian Owns (BUCY) And Is Short (BUCY) Calls; Najarian Owns (CSCO) And Is Short (CSCO) Calls; Najarian Owns (HIG) Calls; Najarian Owns (INTC) And Is Short (INTC) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (YHOO) Call Spread; Terranova Owns (MSFT), (RIMM), (MCD), (AMZN); Terranova Is Short (F), (WYNN); Seygem Asset Management Is Short (PBR); Seymour Owns (AAPL), (AA), BAC), (C), (TM)

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For Joe Terranova
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Diversifier PHOLIO Owns (IGE)
Virtus Diversifier PHOLIO Owns (DBC)
Virtus Diversifier PHOLIO Owns (DBV)
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (ABD)
Virtus Investment Partners Owns More Than 1% Of (CAL)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (SKT)
Virtus Investment Partners Owns More Than 1% Of (TNB)
Virtus Investment Partners Owns More Than 1% Of (UA)
Virtus Investment Partners Owns More Than 1% Of (CLB)

For Jared Levy
Peak6 Investments Owns And Has An Options Position In (SLV)
Peak6 Investments Owns And Has An Options Position In (GLD)

CNBC.com with wires

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CIT
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CSCO
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GPS
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HIG
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HT3
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M
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PSUN
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WMT
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