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Halftime Report: Are Investors Too Giddy With Good Cheer?

Both the S&P and Dow closed higher on Thursday after positive reports on unemployment and durable goods triggered more buying.

The bullish sentiment came despite negative data on new home sales just one day ago.

Considering economic data has been mixed yet the market maintains a bullish tone, the Fast Money traders can’t help but wonder if investors are getting too far ahead of the economic data – essentially, are investors too giddy with good cheer?

Instant Insights from the Fast Money Traders

We get good data some days and bad data on other days, says Guy Adami. Personally, I don’t think the economy is as strong as the stock market action suggests. But you can’t fight the tape and it seems the market wants to rally into the end of the year.

I agree that the market is ahead of the economic data, adds Eugene Profit, and that should make for a very interesting 2010.

There’s no fundamental reason for the market to rally, adds Jim Iuorio of TJM. The market has priced in an economic recovery that’s stronger than what we’re seeing. But that said, I also don’t think it stops the market from rallying into the end of the year.

Technically we’ve broken above resistance in the SPY at 112, adds Jeff Tomasulo. That’s bullish except it happened in light volume.

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BET ON SANTA CLAUS RALLY?

With bullish momentum in the market, chances are you're trying to game a Santa Claus rally. That’s a familiar name for the period between Christmas Eve and the second day of trading in the new year when stocks typically make sizable gains.

Following are Santa Claus rally average gains:

Dow +1.9%
S&P 500 +1.7%
NASDAQ +2.3%

Should you trade the trend?

I’m not a believer in that stuff, says Guy Adami. I’m bearish but I wouldn’t fight the tape.

I do believe in following patterns, counters Jeff Tomasulo, and the pattern suggests more times than not – the Santa Claus rally pans out.

I’m also a believer, adds Eugene Profit. I’d bet on a rally through the end of the year.

Me too. Stay with the market through the end of the year, adds Jim Iurio.

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MIRACLE ON K STREET

On a party-line 60-39 vote, the US Senate approved health care overhaul on Thursday, backing sweeping changes in the medical insurance market and new coverage for tens of millions of uninsured Americans.

What's the trade?

Sell the news, says Guy Adami. I’d take profits on the positive rhetoric and then buy again when it turns negative.

And I think negative news is coming, adds Jeff Tomasulo. Remember that the Senate and House bills have to be reconciled.

But with 30 million more people covered under the new legislation I think long-term it’s positive for the health care sector, adds Eugene Profit.

Health care reform makes me bullish on commodities, explains Jim Iurio. I know that’s a leap but it seems this administration is bent on spending money and that’s bearish for the dollar. Hence my trade.

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SECTOR TRADE: RETAIL

As we mentioned yesterday, retailers are pushing the envelope this holiday season in an effort to win as much business as possible.

Stores such as Macy’s flagship in NYC have been open round the clock for several days now while others including JP Penney are having 5am door buster sales the day after Christmas.

What’s the retail trade?

I’m watching action in Nordstrom, reveals Option Monster Jon Najarian. Action in the January 41 calls suggests some big investors think this stock moves higher. I’m also bullish on TJX. And on the short side, I’m worried about Jo-Ann Stores, he adds.

I’m bullish Walmart , says Jim Iuorio, but as a risk aversion trade.

I liked Amazon going into Wednesday, adds Jeff Tomasulo, but the stock tends to meet resistance around $140.

Amazon trades at an 81 P/E, counters Jim Iuorio, The stock has gone too far too fast. I’m not a buyer.

I wouldn’t fight Amazon, adds Guy Adami. The P/E has always been rich.

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TOPPING THE TAPE: TECH

With Google trading above $600 and Apple touching an all time high, how should you game the space?

What’s the tech trade?

I like Apple, says Jim Iuorio. It seems traders are bullish on speculation of an eTablet.

I’m a buyer of tech short term, reveals Jeff Tomasulo.

I expect to see growth in tech in 2010, but my favorite sector for next year is health care, adds Eugene Profit.

For me the best tech plays are Seagate and NTAP , says Guy Adami.

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TRADE TO GO: HOME DEPOT

I’ve loved Home Depot for a while and I think the stock is in its sweet spot, says Guy Adami.


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Trader disclosure: On Dec. 24th, 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 (NUE), (GS), (MSFT), (INTC), (C), (BTU), (AGU)

Tomasulo Owns (FCX)
Tomasulo Owns (GLD)
Tomasulo Owns Gold Futures
Tomasulo Owns (MCD)
Tomasulo Owns (IBM)
Tomasulo Owns (POT)
Tomasulo Owns (MSFT)

Iuorio Owns (GLD), (GLD) Puts
Iuorio Owns (WMT) Calls
Iuorio Owns (GOOG)
Iuorio Owns (SPY) Calls

Eugene Profit Owns Profit Fund
Profit's Client Portfoliios & Profit Fund Own (AMZN)
Profit's Client Portfoliios & Profit Fund Own (WMT)
Profit's Client Portfoliios & Profit Fund Own (TGT)
Profit's Client Portfoliios & Profit Fund Own (AAPL)
Profit's Client Portfoliios & Profit Fund Own (GOOG)
Profit's Client Portfoliios & Profit Fund Own (MSFT)

Jon Najarian Owns (TJX)
Jon Najarian Is Short (JAS)



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