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Halftime Report: Bet On A Recovery?

Thursday, 20 Aug 2009 | 1:20 PM ET

The bulls were holding the line Thursday with investors betting on an economic recovery. Around lunchtime banks were leading the gains with both the Dow and S&P 500 trading higher.

The sentiment largely stems from positive action in China’s stock market, which reversed course and closed higher, ending a monster a two-week sell-off.

While some investors have seen the Shanghai slide as a troublesome sign about the outlook for the Chinese economy – other pundits including Fast Money’s Tim Seymour have argued that investors should not read too much into daily swings.

The Shanghai index is still up more than 50 percent so far this year, despite falling some 20 percent in just two weeks.

How should you play it?

Fast Money Halftime Report
The Fast Money traders weigh in on the markets and share their midday trading advice.

Instant Insights from the Fast Money traders

I think the worst is over for China, muses OptionMonster Jon Najarian, and I expect to see a strong rally into the fall.

Technical factors had a lot to do with the move down, explains Fast Money trader Tim Seymour. I don’t think China has fallen apart but I do think the market was overheated. If you’re looking for a trade l’m bullish China Life or China Mobile.

I wouldn’t get in the way of the market although I do think there’s another dip coming. However, I covered my shorts today and right now I’m on the sidelines, counsels Patty Edwards of Storehouse.

I think we retrace a little bit but long-term I’m bullish, adds Jared Levy of Peak 6.

The US markets have not led for a year, reminds Greg Troccolli of Opalesque. China’s Shanghai index has proven to be a leading indicator for the rest of the globe...it led the way down last Fall and led the upturn last November.

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BREAKING NEWS: PRIVATE EQUITY BUYING BANKS

According to a report in the Wall Street Journal, "the Federal Deposit Insurance Corp. is expected next week to soften its proposed restrictions on private-equity firms buying collapsed lenders."

Jon Najarian says the news could trigger some quick deals. This means that larger banks looking to pick up smaller banks might not be able to wait or they'll land in competition with private equity. We may see some quick deals done before the vote.

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AIG SOARS NEARLY 30%

Shares of AIG soared on Thursday after newly appointed Chief Executive Robert Benmosche said he expects the bailed-out insurer to be able to repay its federal debts and boost value for shareholders.

What’s the trade?

I believe the move in AIG is a short squeeze, says Jared Levy. It’s a very dangerous stock to play unless you’re a pro.

Because of action in the options market I think the stock continues to be squeezed higher, adds Jon Najarian.

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MIXED BAG FROM RETAIL

Investors spent Thursday digesting mixed results from some of the nation’s largest retailers. Sears posted a surprise loss, sending its shares down 11 percent.

However, many other retailers surprised the Street with better than expected results. Dick's Sporting Goods , Buckle and Children's Place all beat estimates, with Dick's Sporting also upping its full-year earnings view.

And Bon-Ton, which operates the Elder-Beerman, Boston Store and Carson Pirie Scott chains, narrowed its loss view for the year, and its shares jumped almost 27 percent to their year-to-date high.

What’s the retail trade?

I’d only play the space with the best operators out there, explains Patty Edwards. I like Dick’s. People who are unemployed are still doing sports. I also like Buckle. And I’d stay away from Sears.

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FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE

BUY HOMEBUILDERS:Homebuilders traded higher today on better than expected housing data and falling mortgage rates, should you buy?

The stocks have been outperforming, explains Jon Najarian. I'd wait.

BUY GOOGLE: Goldman Sachs added Google to its Conviction Buy List, should you follow suit?

I like this stock long-term, says Jared Levy of Peak 6.

BUY FINANCIALS?Financials soared higher for the second day, should you get in?

I’m flat right now, says Greg Troccoli, and I’ll chase it if we break through the highs from two weeks ago.

BUY GPS? With Gap set to report earnings after the bell today, should you get in?

I think they’re a great operator, says Patty Edwards, but I don’t love the stock right here.

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CALL THE CLOSE

Jon Najarian: I’m an aggressive buyer into the bell.

Jared Levy: If futures stay above 1000 I will remain long; if they look like they're moving lower I’m a seller.

Greg Troccoli: I’m a seller

Patricia Edwards: I’m on the side.


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Trader disclosure: On Aug 20th, 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), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (HAL) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (MSFT), (WMT); Finerman's Firm Owns (AXL) And (AXL) Calls; Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC), Finerman Owns (WFC) Preferred Shares; Finerman's Firm Is Short (IYR), (IJR), (IWM), (SPY), (USO), (MDY);Finerman's Firm Owns (ARO); Seymour Owns (AAPL); Seymour Owns (BAC)
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CNBC.com with wires

  Price   Change %Change
DJIA
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SHANGHAI
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S&P 500
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AFF
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BKE
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BONT
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941
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DKS
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GPS
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1628
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PLCE
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SHLD
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SPDR SP HB
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SPDR FIN SEL
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GOOGL
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