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Halftime Report: Why Did Bulls Shrug Off 100 Point Dow Drop?

Despite rough economic data on manufacturing and jobs the bulls could not be held down on Tuesday. Around lunchtime both the Dow and S&P had turned positive although they later turned negative.

What must you know to trade this market?

If you’re looking for a market ‘tell’, just look at the charts of Goldman vs. S&P, explains Fast Money trader Guy Adami. The turnaround in both was really quite extraordinary. Personally, I was surprised to see the S&P come back so violently.

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I call that window dressing, says Danielle Hughes of Divine Capital. It’s the end of the quarter and money managers are snapping up outperformers to ‘dress’ their portfolios. As a result the bulls are really fighting the bears.

In the options market I saw upside call buying when the market was down, adds Jared Levy of Peak 6.

Patterns in the charts look bullish to me, says Greg Trocoli of Opalesque. However I’m short after last week’s key reversal. We’ve not had price action that traded above that level. It really is a fight between the bulls and bears.

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NASDAQ HIGHER

Tech stocks erased their losses on Wednesday with the Nasdaq trading higher around lunchtime led by Cisco . It appears investors are betting that the sector will lead the recovery as the economy turns.

What’s the tech trade?

It feels to me that we’re seeing rotation, says Guy Adami. And I’ve got my eye on Intel , he adds. Intel just doesn’t seem to get above $20 – that’s a ‘tell.” IBM tried to get above $120 and failed. Oracle earnings weren’t great. I think those are all warning signs.

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CIT BANKRUPTCY WEIGHING ON BANKS

Shares of CIT Group plunged Wednesday on concerns that the struggling commercial lender would turn itself over to bondholders.

It was not immediately clear if those bondholders have been presented a plan, or how many of them might support the plan.

What’s the bank trade?

It seem like investors are hesitant to get into banks before quarter’s end, muses Danielle Hughes. I’m watching the pullback in names such as HSBC and other big names that pay dividends. That’s a big warning sign to me that says stay away from financials.

Don’t forget the FDIC may be increasing some bank requirements, adds Jared Levy. That could spell big costs for Wells , Citi as well as JPMorgan.

One of my favorite stocks, Jefferies, traded higher in this session, explains Guy Adami. I like this stock. However at current levels valuations might be a little rich.

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TOPPING THE TAPE: OIL

The price of crude oil rose above $68 per barrel on Wednesday, buoyed by a drop in U.S. gasoline inventories and a weak dollar.

U.S. government weekly oil data on Wednesday showed a 1.6 million barrel drop in gasoline inventories and over the past four weeks gasoline demand was up by more than 5 percent.

What’s the trade?

I’d get long commodities, counsels Joe Terranova. I expect to see the dollar under pressure in Q4 and as a result oil, gold and other metals should rally.

I’m seeing big put buying in the XLE, counters Jared Levy. I’d be careful in this space because it seems like investors are very interested in protection.

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CALL THE CLOSE

Guy Adami: Don’t fight the tape, I’d be long into the close.

Jared Levy: I’m bullish into the close.

Danielle Hughes: I’m a seller because it’s the last day of the quarter.

Greg Troccoli: I’m short.


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Trader disclosure: On Sept. 30th, 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); Finerman's Firm Owns (BAC) Preferred Shares, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred Shares And (BAC); Finerman's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Owns (BKC), (DRI), (MSFT), (YUM); Finerman's Firm Is Short (CAKE), (TLT), (USO), (IJR), (IWM), (SPY), (MDY), (USO), (UNG); Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (C), (COST), (CSCO), (PFE), (PRST), (V), (WMT), (FAZ); Terranova Owns (FCX), (ANR), (SU), (BUCY), (GEX), (POT), (CAM), (MSFT), (AMZN), (GDX), (KCE), (ABT), (SUN); Terranova Owns (XOM) Calls; Terranova Owns (FTO) Calls; Terranova Is Short (GRMN), (ESS), (CCL), (FII), (JWN), (JCI), (WYNN); Terranova Owns March Sugar Futures; Terranova Owns December Copper Futures; Terranova Owns December Crude Oil Futures; Terranova Owns December Gold Futures

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