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Halftime Report: Thursday’s Sell-Off Watershed Moment For Market?

Thursday, 24 Sep 2009 | 1:15 PM ET

If you were beginning to think the stock market only went up, think again. Both the Dow and S&P shrugged off bullish jobs data and drifted lower on Thursday after a surprise decline in existing home sales led to speculation that the economic recovery may be bumpy, at best.

With a number of stocks reaching pre-Lehman levels this week including Morgan Stanley, Goldman , Apple and Google -- just to name a few - is the current turn lower a watershed moment for the market?

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

Instant Insights with the Fast Money traders

Typically, they don’t ring bells at the top of a market, muses Jon Najarian, but there are certainly signs that investors are getting nervous. The Vix pushed up toward 25 it’s highest level in a while. It’s possible investors are looking to hedge if not get off the train all together.

The price action over the last two days feels different to me, adds Christopher Zook of CAZ. It seems like the sellers are getting more aggressive.

On Monday there was a key reversal in the S&P, explains Greg Troccoli of Opalesque. Because of bearish patterns I am short the S&P with a stop just above yesterday’s high.

I’m watching financials , adds JJ Kinahan of TD Ameritrade. Financials are the one sector that investors feel will lead us up or down. So if there’s a chink in the armor this is the first place where it could show up.

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HOMEBUILDERS LOSE GAINS AFTER HOUSING DATA

Sales of previously owned U.S. homes fell unexpectedly in August, generating a bump in the road for the housing market's comeback. Following the data, the Dow Jones home construction index dropped as did homebuilders Lennar and KB Home .

Meanwhile, Goldman Sachs upgraded the U.S. homebuilders sector to 'attractive,' saying stable home prices, low mortgage rates and a strength in sales activity should lead to higher equity values.

The brokerage expects growth of 30 percent in new home sales in 2010 and said as new home sales continue to rise toward its 2010 forecast of 525,000 to 550,000, homebuilders would see share price appreciation.

What’s the trade?

I hate to fade Goldman but I think they’re late, says Jon Najarian. I think the move has already happened.

It seems to me there won’t be enough fundamental news to fuel the sector, adds Greg Troccoli, at least not until next year.

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TAKE YOUR POSITION: RIMM

Research In Motion releases its profit report on Thursday after the bell. What must you know to trade this stock?

The BlackBerry maker is expected to forecast strong gains for its current quarter on Thursday with analysts, on average, expecting a 16.3% increase in profit and a 41% rise in revenue according to Reuters Estimates.

But perhaps even more important, the company is expected to boost its forecast for the current quarter, which finishes at the end of November.

And investors should hear more about its expanded line of BlackBerrys which the company says will offer far more choices that either of its main rivals, Apple or Palm , analysts say.

What’s the trade?

I’m seeing a lot of out of the money call buying, reveals JJ Kinahan.

I’d be a seller of the upside call spread or the put spread so you define your risk, adds Jon Najarian.

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OIL SLIDES BELOW $67

Oil prices dropped more than $2 toward $66 a barrel and were on track to fall nearly 7 percent this week as a surprise jump in U.S. crude and product stocks stirred doubts that prices may have run ahead of demand fundamentals.

What’s the trade?

There was a key reversal in crude, explains Addison Armstrong of Tradition Energy. I think $66 is short term resistance but we could go to $65.25 pretty quickly.

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TRADE TO GO -- MOODY'S

There’s been a huge increase of negative sentiment in Moody's stock, explains Jon Najarian. Warren Buffett has been a seller and the volume of puts trading has exploded. Personally, I think stock could test the March lows of $16.

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CALL THE CLOSE

Jon Najarian: I’m short.

JJ Kinahan: I’m a buyer.

Greg Troccoli: I’m short with a tight stop.

Christopher Zook: I’m short with a stop above yesterday’s high.


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Trader disclosure: On Sept. 24th, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Terranova Owns (F); Terranova Owns (F) Calls And (F) Puts; Terranova Works For (VRTS); Finerman's Firm Owns (BAC) Preferred Shares, Finerman Owns (BAC) Preferred Shares And Owns (BAC); Finerman's Firm Owns (WFC) Preferred Shares And Is Short (WFC); Finerman Owns (WFC) Preferred Shares; Finerman Owns (RIG); Finerman's Firm Owns (MSFT), (NOK), (PBR), (WMT), (RIG), (TGT); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Seymour Owns (AAPL), (AA), (BX), (EEM), (RIMM), (BAC), (RIG), (SBUX), (FXI)

For Steve Cortes
Cortes Is Short (FXI)
Cortes Owns S&P Futures
Cortes Is Short The Euro
Cortes Is Short British Pound

For Mark Mahaney
Citigroup Has Received Compensation From (GOOG)
(GOOG) Has Been A Client of Citigroup In Past 12 Months
Citi Is A Market Maker In Shares Of (GOOG)

CNBC.com with wires

  Price   Change %Change
AAPL
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GOOGL
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CONSTRUCTION
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DJIA
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S&P 500
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GS
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KBH
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LEN
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MCO
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MS
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BB
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VIX
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SPDR FIN SEL
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