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Halftime Report: Trade Like The Recession Is Over?

Published: Thursday, 29 Oct 2009 | 1:17 PM ET

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By: Lee Brodie
Web Editor

Halftime Report

Both the Dow [.DJIA Loading... () ] and S&P 500 [.SPX Loading... () ] rallied on Thursday following four losing sessions as data showed the U.S. economy grew faster than expected in the third quarter after more than a year of contraction.

Specifically, better than expected GDP numbers sent the bulls off and running after the latest numbers showed the economy expanded at a 3.5%, unofficially ending the worst recession in 70 years.

Also quarterly profits at consumer product giants Procter & Gamble [PG Loading... () ] and Colgate-Palmolive [CL Loading... () ] both surpassed expectations, and lifted investors sentiment.

What should you be watching?

I’m still negative on the market, explains Christopher Zook of CAZ. The pop today is likely a reaction to the overly pessimistic reaction to GDP we got on Wednesday afternoon. But I’m more focused on the uptrend that started on March 9^th. That trend line is now broken. That says to me we’re on a neutral path not a bullish one.

I’m also closely watching patterns in the S&P [.SPX Loading... () ], explains Greg Trocolli of Opalesque. Specifically, I’m closely watching 1066 as an inflection point. If we get above 1066 all short bets are off.

Also watch the Vix [VIX Loading... () ] counsels OptionMonster Jon Najarian. It’s down significantly which may be confirmation that investors are getting out of the way -- to the upside. If the S&P closes above 1063, then I think the rally is back on.

When I look at Thursday’s GDP I think without the government stimulus we’d be in a terrible position, muses Michael Gurka of Empower. As far as I’m concerned the market action today is shorts unwinding their positions.

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NEW FEATURE - HISTORY CHALLENGE

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MOTOROLA IGNITES TECH TRADE

The smartphone trade seems to be back on after Motorola [MOT Loading... () ] forecast a higher-than-expected profit for the current quarter.

Investors recently turned bullish on this stock after the firm announced plans to release its new Droid phone on November 6^th – in an attempt to win market share from Apple’s iPhone.

What’s the trade?

I think there is more upside to come in the smartphone space, muses Greg Troccoli.

I would not be a buyer, counters Christopher Zook. RIM [RIMM Loading... () ] and Palm [PALM Loading... () ] charts both look broken to me.

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THE OBAMA TRADE: HOMEBUILDERS

The Homebuilders ETF [XHB Loading... () ] traded higher on Thursday after a published report suggested Congress is not only poised to extend the home buyer tax credit for first-time homebuyers through April -- but also expand coverage to repeat buyers.

The report said the tax credit would remain at its current $8,000 for first-time buyers, while a new credit for repeat buyers of a primary residence who have been in their house for at least five years would receive a credit of $6,500.

What’s the trade?

I ‘d look downstream in this space, says Jon Najarian. I think the trade is long Mohawk Industries [MHK Loading... () ] , he says. And I’d look at Masco [MAS Loading... () ] too, also as a derivative play.

Or think about long copper [US@HG.1 Loading... () ], counsels Mike Gurka. Historically it’s still cheap. Unless I see a major rejection I’m positive on the metal.

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TRADERS BETTING ON LAS VEGAS SANDS

Jim Iurio has spotted unusual options activity in Las Vegas Sands [LVS Loading... () ].

The volume of Jan 20 calls traded suggests to him that this stock could make a significant move higher. Iuiro suggests that big investors are betting LVS earnings will surprise to the upside.

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CALL THE CLOSE

Jon Najarian: I’m long into the bell.

Greg Troccoli: I’m short with a stop at 1072.

Christopher Zook: I’m short.

Michael Gurka: I’m long. We held a trend line of 1033.

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Trader disclosure: On October 29th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (AA), (BAC), (BX), (EEM), (MYL), (INTC), (MSFT), (VALE); Seymour Is Short (FXI); Grasso Owns (AAPL), (ABK), (BA), (C), (COST), (PFE), (WMT), (FAZ); Terranova Owns (IBM), (QCOM), (GS); Finerman Owns (BAC), (PDE), (TGT), (WMT); Finerman's Firm Owns (PDE), (FLS), (RIG), (TBT), (YUM); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG), (TLT); Jon Najarian Owns (INTC) Calls, Jon Najarian Owns (AMD) Calls

For Steve Grasso
Stuart Frankel Owns (MSFT)
Stuart Frankel Owns (PFE)
Stuart Franked Owns (SDS)

CNBC.com with wires

Topics:Dow Jones Industrial Average | Housing | Stock Market | Stock Picks