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Halftime Report: Take Profits Or Buy The Dip?

With one of the most hotly anticipated earnings season in years about to kick-off after the bell, markets lost a little steam as investors took a wait and see attitude.

The Street will be looking for signs the economic recovery is translating into improved corporate profits. And if they don’t get that, some analysts anticipate a sell-off triggered by profit taking.

Should you take profits or are their buying opportunities in this down-tape?

It seems to me investors are cautious ahead of earnings, muses Fast Money trader Tim Seymour. The Street appears to be focused on 1040 on the S&P 500, as a key level. If we break below it we may have some trouble.

The IPO of Banco Santander (Brazil) on the NYSE is getting attention, explains Danielle Hughes of Divine Capital, and new IPOs could be a harbinger of better days to come. But right now I agree with Tim. I’m seeing caution. There’s been a huge run-up in the market over the past weeks and it’s out of line with what’s happening on Main Street.

I think the stock market action right now is all about career risk, says Brian Kelly of Kanundrum. Money managers can’t afford to have two bad years in a row. That’s what the market is struggling with right now.

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GOLD PUSHES HIGHER TO NEW RECORD

The price of gold surged to a new high on Wednesday, as investors poured into the precious metal as an alternative investment.

As we first told you yesterday, gold has benefited from a confluence of factors including the dollar's decline, technical buying momentum and worries about potential inflation as central banks struggle to emerge from unprecedented fiscal stimulus measures.

What’s the play?

Around 76.50 I expect the dollar to fail – and if that happens, gold should rally, says Tim Seymour. The reason – I don’t see any major change in the Fed’s interest rate policy which is going to direct the path of the dollar.

I’m watching the historical ratio of gold to silver, explains Jared Levy of Peak6. Patterns suggest to me, that gold continues to rise and takes silver with it. Because there’s a discount built into the price of silver, I’m bullish silver.

I’m also bullish silver, adds Brian Kelly. Not only does it have a currency appeal but it has an industrial appeal. However I’d be a renter not an owner. This isn’t a long-term play.

I don’t understand why historical ratios hold any influence over trades these days, says Tim Seymour. We’re in a new paradigm. I’d be cautious.

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TAKE YOUR POSITION: ALCOA

Alcoa reports earnings on Wednesday after the bell. On average, analysts expect the aluminum giant to post a third-quarter loss of 11 cents per share on revenue of $4.5 billion, according to a poll by Thomson Reuters.

The global economic slowdown took a sizable toll on the aluminum industry late last year as demand evaporated for the lightweight metal. That sent aluminum prices sharply lower and forced producers of the metal to slash production.

But aluminum prices — a key indicator of the industry's health — generally have edged up in recent months and Alcoa has boosted its annual forecast for global aluminum consumption, citing stronger demand from China.

What’s the trade?

I think Alcoa will probably beat, says Danielle Hughes but I’d hesitate to get in ahead of earnings.

The demand / supply in aluminum just doesn’t make sense, says Brian Kelly. I just can’t be a buyer of Alcoa.

If you’re looking for an earnings play I’d look at Valero which I think is due for a pop, though it doesn’t report until later in the month, adds Hughes.

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CAN DOLLAR PUSH HIGHER?

The U.S. dollar rebounded from its lowest level against the yen in more than eight months on Wednesday as traders bought back the greenback after the pair failed to break key technical levels.

What’s the trade?

Markets ebb and markets flow, says Dennis Gartman. That’s what we’re seeing; a dollar correction. Nothing dramatic.

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TRADE TO GO: Banco Santander (Brasil)

I’d be cautious of this IPO, says Tim Seymour. The deal did not come cheap. If you’re looking to play Brazil I’d do it with cellular companies such as TIM Participacoes or Vivo Participacoes .

CALL THE CLOSE

Tim Seymour: I’d hold.

Jared Levy: I’m taking off long positions.

Danielle Hughes: I’m a seller. I’m unsure what’s on the horizon.

Brian Kelly: I’m a seller.


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Trader disclosure: On October 7, 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); Terranova Owns (NOV), (MOS), (JPM); Terranova Is Short (CCL); Terranova Is Short (WYNN); Terranova Is Short (GRMN); Terranova Owns Dec. Gold Futures; Terranova Owns March Sugar Futures; Terranova Owns Crude Futures; Seymour Owns (ACI), (AA), (STD), (BX), (BAC), (SBUX); Seymour Owns (RTP); Najarian Owns (C) Calls; Najarian Owns (BRCD) Call Spread; Najarian Owns (DFS) Calls; Najarian Owns (DELL) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) & Short (JPM) Calls; Najarian Owns (HMY) Calls Spread; Najarian Owns (LAZ) & Short (LAZ) Calls & Long (LAZ) Put Spread; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (MYL) Calls; Najarian Owns (PLCM) Call Spread; Najarian Owns (TEVA); Najarian Owns (ORCL) & Short (ORCL) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (WFC) Puts; Najarian Owns (YHOO) Call Spread; Najarian Owns (DFS) Calls

For Deborah Weinswig:
Citigroup Global Markets Inc. acted as a joint bookrunner on the announced debt offering of (WMT)
Citi Owns (TGT)
Citi Owns (SKS)
Citi Co-Managed An Offering Of Securities of (WMT)
Citi Has Received Compensation From (M)
Citi Has Received Compensation From (TGT)
Citi Has Received Compensation From (WMT)
Citi Has Received Compensation From SKS)
Citi Expects To Receive Compesation From (WMT)
Citi Has Received Compensation From (COST)
Citi Has Received Compesation from (HD)

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