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Halftime Report: Market Moves Higher But Are Gains Sustainable?

Sellers found no traction Wednesday as the markets continued to push to new highs. Both the S&P 500 and Nasdaq jumped as new data showed that industrial output advanced for a second consecutive month in August. The results pushed up commodity prices, with gold hitting an 18-month high and natural resource companies like Freeport-McMoran coming out winners.

But with stocks up for 8 of the last 9 days is the rally sustainable?

Instant Insights with the Fast Money traders

Although money managers may be chasing returns the new data is actually bullish, explains Tim Seymour. I think we’re seeing signs of real demand returning. Although I don’t expect the market to runaway, any pullback should be shallow.

There’s definitely performance anxiety in this market, muses Mike Khouw of Cantor Fitzgerald. Many investors were anticipating a pullback and now that we haven’t gotten it, they have to admit they were wrong and embrace the climb higher.

I have to admit that I still have short positions on, reveals Danielle Hughes of Divine Capital. First the big moves were in big cap names and now the laggards are following. Once the entire herd thinks “this rally is real” that’s the moment that I think the market could pull out from under us.

Don't forget there were healthy 1% gains in Asia and Europe, says Mike Gurka of Empower Global Funds. The S&P looks strong to me. I see support around 1024. And if the financials come into the mix I think the market has real fuel.

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GOLD BREAKING OUT

The spot price of gold soared higher on Wednesday largely propelled by the weak dollar and a belief that the stimulus plan will trigger serious inflation down the road.

What’s the trade?

I always think gold should be part of any portfolio, explains Tim Seymour. For a trade right now I think gold will continue to track, however I wouldn’t chase it.

I’d wait for a dip too, adds Danielle Hughes. It all goes back to currencies. China has to protect itself considering all the dollars they hold and the dollar is getting weaker.


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SECTOR TRADE: INTERNET TRADE STILL ROCKING

Amazon shares traded higher on Wednesday after BofA-Merrill upgraded the stock to buy from neutral, predicting e-commerce sales will rebound to double-digit growth year over year in 2010.

What’s the trade?

There’s a lot of activity in the Amazon options, explains Mike Khouw. As volatility comes off it’s more attractive to place bets in the options market or if you're long protect your investment with puts.


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OIL JUMPS AFTER INVENTORIES DROP

Oil prices rose Wednesday after the government reported a large drop in crude supplies. Benchmark crude for October delivery climbed 96 cents to $71.89 a barrel on the New York Mercantile Exchange

The increase was largely triggered by an Energy Information Administration report which showed a decrease of 4.7 million barrels of oil for the week ended Friday, a bigger decline than the 3 million barrel drop expected by analysts.

However Jim Ritterbusch of Ritterbusch and Associates says it’s important to note that the decline is typical this time of year as refiners slow their buying of oil during a period of declining demand.

What’s the oil trade?

Fundamentally there is a lot of inventory, says Joe Terranova. Personally, I was surprised oil didn’t go above $72 on such a strong tape. That makes me suspicious.


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FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE

BUY MT? ArcelorMittal traded higher as it held its annual investor day and said steel demand will grow 3%-5%; should you buy?

I’m a buyer, says Tim Seymour. It’s the biggest steel company in the world with the biggest balance sheet.

BUY PALM? Palm releases earnings tomorrow, should you buy today?

I’d stay away, says Mike Khouw. The options market suggests investors are bearish.

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CALL THE CLOSE

Tim Seymour: It’s a bull market. Don’t fear it, don’t fight it.

Danielle Hughes: I’m a buyer through Sept. 30th.

Mike Khouw: I’d hang onto positions but protect with options.

Mike Gurka: I’m long and expect a great tone for the rest of the week.


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Trader disclosure: On Sept. 16, 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); Seymour Owns (AA), (DRY), (BAC), (EEM), (FXI), (RIG), (SBUX); Seymour's Firm Owns (BUD); Najarian Owns (AAPL) & Short (AAPL) Calls; Najarian Owns (ACI) Call Spread; Najarian Owns (BAC) & Short (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (CUX); Najarian Owns (FCX), Owns (FCX) Put, Is Short (FCX) Calls; Najarian Owns (GE) Call; Najarian Owns (JPM) & Is Short (JPM) Calls; Najarian Owns (JOYG) & Short (JOYG) Calls; Najarian Owns (MS) And Is Short (MS) Call; Najarian Owns (MSFT) And Is Short (MSFT) Call; Najarian Owns (PALM) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TEVA); Najarian Owns (V) & Short (V) Calls; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Calls; Terranova Owns Gold Futures; Terranova Owns Oct, Nov, Dec Crude Contracts; Terranova Is Short Dec 2010, Dec 2012, Dec 2016 Crude Contracts

For Whitney Tilson
Tilson's Funds Were Short (PMI), (RDN), Bear Stearns, Lehman Brothers On 3/20/08
Funds Managed By Whitney Tilson Own (WFC)
Funds Managed By Whitney Tilson Own (AXP) And Are Short (COF)

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