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Halftime Report: Market Melt-Up?

Stocks searched for direction on Wednesday as investors attempted to determine just how bumpy the road to recovery may be.

Energy shares sold off after the latest government inventory data showed a surprising build in crude and gasoline stockpiles.

However, that bearish crude report could be interpreted as good news for the economy – it should keep prices steady to lower at the pump.

With the S&P 500 testing the technically important 1113 level, is the market trying to melt-up?

Instant Insights with the Fast Money traders

1113 is the line in the sand, explains Scott Redler of T3. If we can stay above that level for 60 minutes, it could open a move to 1150. But until we get above 1113, stay light on your feet.

I’d want us to close above 1113, says Brian Kelly of Kanundrum. That combined with a strong dollar would get me very excited. It says to me there’s momentum in the market. I could see investors on the sidelines coming back into the market -- and I expect they will rotate into tech, financials and the homebuilders.

I don’t buy that, counters Jared Levy of Peak 6. In the SPX, the 10 and 20 day moving averages are converging and volume is dissipating. It feel like this is a repeat of 2008 – where we saw a sharp reversal. It may not come until late month – but I think a reversal is coming.

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JPMORGAN WEIGHING ON FINANCIALS

Meanwhile, the financials lagged the broad market on concerns that bank profits could be hurt by the impending Wall Street crackdown.

According to a Sanford C. Bernstein note, JPMorgan said it could see its revenue fall by as much as $3 billion under the new legislation.

What’s the bank trade?

I think this is a buying opportunity in Goldman , counsels Jon Najarian. Below $170 is an opportunity in my book.

The financials have been lagging this latest move, reminds Scott Redler. I’d avoid them for now. They’re showing relative weakness and there’s a negative divergence. I’d only be a buyer of Goldman at $155 or lower.

In the options market, I’ve seen a lot of call selling and strangle selling in Bank of America, says Jared Levy. I’d be cautious.

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AIRLINES STOCKS RALLYING

The Airlines Index shot higher on Wednesday after Morgan Stanley analyst William Greene raised his view on the sector to attractive from in-line, saying he believes "investors will be hard-pressed to (find) a better entry-point in the coming months."

He also boosted his ratings on AMR Corp. and UAL Corp. to overweight from equalweight.

What’s the trade?

Airlines are a tough space to trade because of fuel prices, says Brian Kelly. If you believe in global growth you have to believe in higher oil prices – which is bad for airlines. I’d just stay away.

I’m long AMR, UAL and CAL , counters Jon Najarian. I think these stocks are a play on global recovery and I agree with Morgan Stanley; I also don’t think you’ll have a chance to get in lower.

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TOPPING THE TAPE: METAL NAMES

Metal names such as Alcoa led the materials sector higher on Wednesday as investors bet long-term dollar weakness will lead to higher metal prices -- and higher share prices for related companies.

What’s the trade?

I’m a buyer of AA, says Brian Kelly, as a momentum play. And on the fundamental side I believe in global growth, which is also bullish for this name.

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GOLD CAN’T BE STOPPED

US. spot gold hit a new record above $1,203 per ounce on Wednesday, marking an all-time high for the second straight day as investors sought the precious metal as an alternative investment.

What’s the trade?

I sold my position in gold on Wednesday, reveals Scott Redler. I’m a seller into strength. Patterns in the charts suggest it’s ahead of itself. But I am a buyer again around $1040.

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CALL THE CLOSE

Jared Levy: Sell to neutralize into Friday’s jobs number

Brian Kelly: I’m a buyer above 1113

Scott Redler: Above 1113 I’m a buyer.

Jon Najarian: I like it as well.


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Trader disclosure: On December 2nd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (SU), (GOOG) ; Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (PLCE), (MSFT), (WMT), (PDE), (RIG), (TGT); Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO), (UNG; Grasso Owns (AAPL), (BA), (BAC), (C), (WMT), (V); Najarian Owns (AAPL) Call Spread; Najarian Owns (BRCD) & (BRCD) Calls; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (DELL) Calls; Najarian Owns (DE) Call Spread; Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (UAUA) Call Spread

For Steve Grasso:
Stuart Frankel Owns (NWS),
Stuart Frankel Owns (PDE)
Stuart Frankel Owns (SDS)
Stuart Frankel Owns (YHOO)
Stuart Frankel is Short (QQQQ)

Funds Managed By Todd Gordon Are Short Eur/ Dollar




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Symbol
Price
 
Change
%Change
S&P 500
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AA
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AAL
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BAC
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CPT
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GS
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JPM MLP ETN
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SPDR NRG SEL
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SPDR FIN SEL
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