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Halftime Report: Are Stocks Trying To Drift Higher?

Stocks hit a new 2009 high, with positive economic data pushing the S&P 500 up briefly to a 14-month high; the tailwind largely generated by existing home sales.

The new housing data pointed to more stabilization in housing, and ultimately bolstered optimism about the economic recovery.

On top of that bullish news, the Fast Money traders are also watching action in the dollar . Both stocks and the greenback moved higher in tandem, again leading to speculation that the weak dollar / strong stock market trade had started to unwind.

What must you know to trade this market?

I’m excited by the tape Tuesday and a cautious buyer into the close, says Pete Najarian. I’m not seeing selling pressure. In fact I see some investors adding to their positions, especially in technology.

I’m seeing put buying in the XLF , adds JJ Kinahan of TD Ameritrade. It seems to me that investors are buying these stocks and protecting themselves. That's relatively bullish. Looking at the broader market, I think the S&P 500 futures have room to drift up to 1124.

I’ve been watching 1112 on the S&P and on Tuesday we broke higher, adds Patty Edwards of Storehouse. But I’m not convinced the rally is for real. Instead, if you’re looking to establish long positions, I’d suggest concentrating on individual stocks.

I’m a hesitant buyer into the close, adds Todd Gordon of Forex.com, and I think the dollar strength (mentioned above) is due to repatriation and not a new correlation.

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OPTIONS ACTION: VOLATILITY INDEX DIPS

On Tuesday, options traders were closely watching action in the Vix . Wall Street's favorite gauge of market turbulence, briefly fell below 20 on Tuesday, its lowest level since August 2008.

What’s the trade?

I’m not seeing enough movement in the S&P to support the Vix where it is at 20, reveals Pete Najarian. I think we could see the Vix at 17.

But don’t be lulled to sleep, counters JJ Kinahan. I don’t think volatility is over. We typically have lower volume around the holidays and that could account for levels in the Vix.

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TOPPING THE TAPE: HOMEBUILDERS SURGING

Shares of the Homebuilders ETF traded higher on Tuesday after new data from the National Association of Realtors showed sales of previously owned homes in the United States surged last month as prices continued to fall and buyers rushed to take advantage of a popular tax credit.

The group said that sales rose 7.4 percent to an annual rate of 6.54 million units, the fastest pace since February 2007, and higher than the 6.25 million unit pace expected.

What’s the trade?

Home Depot and Lowes make more sense than the homebuilders stocks, counsels Patty Edwards. I’d much rather play those two. I believe more foreclosures lie ahead and that should put the homebuilders under pressure.

I agree with Patty, echoes Todd Gordon. Resistance is there and momentum is slowing. I’m waiting for another shoe to drop in 2010.

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TOPPING THE TAPE: AIRLINES

Shares of US Airways and other airlines climbed on Tuesday as oil prices slipped and OPEC agreed to maintain its existing production targets. One of the largest costs for airlines is fuel.

What’s the trade?

I still see upside in the sector, says Gary Kaminsky. Airlines are passing along costs to consumers, they’re taken capacity out, and price increases are sticking.

But it’s a momentum trade. It’s a trade based on results coming in better than the Street anticipates. However, when you start to see discounting – such as low fare sales in the newspapers -- the trade is over.

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FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE

BUY MICRON? With Micron reporting earnings on Tuesday after the bell; how should you game the stock?

I’m a buyer, says JJ Kinahan.

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BUY RED HAT?Red Hat also releases quarterly results after the bell Tuesday, how should you game it?

I would not buy, says Pete Najarian. It’s had a huge run and I’d be cautious.

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BUY BED, BATH & BEYOND? With Morgan Stanley initiating coverage of Bed Bath & Beyond at 'Overweight,' how should you trade it?

If it breaks below $30, I’m a buyer, says Patty Edwards.

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BUY OIL? Considering crude traded lower and the dollar traded higher, what’s the best way to game oil?

I’d wait and buy strength in oil, counsels Todd Gordon.

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CALL THE CLOSE

Pete Najarian: I’m a hesitant buyer.

JJ Kinahan: I’m a buyer.

Patricia Edwards: I’m watching 1112 on the S&P and we broke higher. But I’m not convinced. I’d concentrate on individual stocks.

Todd Gordon: I’m a hesitant buyer and I think the dollar strengthening is repatriation and not a new correlation.


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Trader disclosure: On December 22nd, 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 (INTC), (MSFT), (NUE), (BTU), (AGU), (C), (GS); Pete Najarian Owns (CLF), Is Short (CLF) Calls; Pete Najarian Owns (MS), Is Short (MS) Calls; Pete Najarian Owns (MRVL); Pete Najarian Owns (STX) Calls; Pete Najarian Owns (UUP) Call Spread

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)

For Jon Najarian
Jon Najarian Owns (RYL)
Jon Najarian Owns (KBH)

For Eric Beder
Beder Owns (ANF)
Beder Owns (TGT)
Brean Murray, Carret & Co. Is A Market Maker In (BEBE), (CACH), (TRLG), (WTSLA), (URBN)

For Peter Schiff
Schiff Owns Gold

Add'l Disclosures:
Finerman's Firm Is Short (IJR)
Finerman's Firm Is Short (MDY)
Finerman's Firm Is Short (SPY)
Finerman's Firm Is Short (IWM)
Finerman Owns (AAPL)
Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spread
Finerman Owns (BAC) Preferred, (BAC)
Finerman's Firm Owns (BDX)
Finerman's Firm Owns (BCR)
Finerman's Firm Owns (MSFT)
Finerman's Firm Owns (PLCE)
Finerman's Firm Is Short (TLT)
Finerman's Firm And Finerman Own (WFC) Preferred
Finerman's Firm Owns (WMT)
Pete Najarian Owns (CAT) Calls


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