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Halftime Report: Can Momentum Drive Stocks Even Higher?

Only two things seem able to shake this market: debt troubles abroad and housing troubles here at home. We got a double whammy Wednesday.

Considering stocks are trading near 18-month highs should you run for the exits or hold your breath and buy?

Strategy Session with the Fast Money traders

I find the market’s performance very impressive, says Joe Terranova. We haven’t seen quality participation but yet the major indexes have climbed higher. I’m not sure if it’s a melt-up or if the market is anticipating a strong jobs report. But either way the momentum points higher.

With all the low volume in this market I think the market is waiting for something, says Jared Levy – perhaps it’s the jobs report. As we wait I think it’s probable we see a small retracement in stocks and I’m growing bearish at least for the next few weeks.

I think yesterday’s resistance is today’s support in the S&P, adds Mike Gurka of Neural. I like the S&P here and if it starts to dip I’m a buyer.

As long as money is cheap I’m also a buyer of this market, adds Brian Kelly of Kunundrum.

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EURO FALLS TO 10 MONTH LOW

The traders are closely watching the action in the currency markets after the euro extended its losses to a 10-month low against the dollar on Wednesday. Also the dollar rose to a one month high against the yen.

What’s the trade?

It’s all about the LIBOR rate in yen versus the LIBOR rate in dollars, explains Brian Kelly. About a month ago it flipped. So it’s cheaper to borrow yen than it is to borrow dollars. The carry trade is back on.

With the carry trade back on, I expect to see convergence trades with investors borrowing in yen and investors facilitating purchases in dollar, adds Mike Gurka.

Typically the dollar is strong in the morning but then backs off in the afternoon, says Joe Terranova. However, that’s not happening on Wednesday. I’d play it with commodities -- I’d be short oil against $82 as long as the euro remains weak.

I’m long dollars versus a slew of currencies, says Brian Kelly. I think the EU is heading toward crisis but I also expect it to be resolved.

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TOPPING THE TAPE: GENERAL ELECTRIC

Considering industrials are now the best performing sector for 2010, the Fast Money traders are keeping an eye on outperformers in the space. And it appears GE is outperforming its peers hitting another 52-week high.

What’s the trade?

I’ve been long since November and I think it’s time to take profits, counsels Brian Kelly.

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WIRELESS WARS

The CTIA conference is underway in Las Vegas and early buzz from the event suggests that the day is quickly coming when you’ll no longer need a computer and separate cell phone – soon they’ll be one device.

In fact, Sprint's new 4G phone, which we showed you yesterday, is very much a combination computer and cell phone. And it debuts this summer.

How should you trade the space?

Sprint is moving higher on the news, explains Brian Kelly, and I think it has room to run. I think Sprint is ahead of the curve.

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10 YEAR US SWAP SPREAD

Brian Kelly is watching the action in the 10-year swap spread. (Essentially that’s the swaps rate less the Treasuries rate.)

He tells the desk, for the first time in history the cost for a corporation to borrow (as measured by the 10 year swap rate) is lower than the cost of borrowing for the United States of America

That means private equity can borrow money cheaply, says Kelly.

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AUCTION ACTION

U.S. Treasuries prices fell sharply on Wednesday, sending benchmark 10-year yields to their highest in a month, on strong economic data and worries over appetite for the government's enormous debt issuance.

The government will auction $42 billion worth of five-year notes at 1 p.m. in a sale that follows Tuesday's lackluster offering of two-year notes.

"Yesterday's two-year auction wasn't a great success," says Carl Lantz of Credit Suisse in a Reuters interview.

"If the two-year auction wasn't great it seems likely that the longer duration stuff will have even more trouble. I think there is a bit of that kind of worry going on."

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EAR TO THE WALL: DEVON

Jared Levy has spotted unusual options activity in Devon. The large volume of April 70 calls and April 75 calls traded suggest to Levy that this stock could make a sharp move higher. There’s market chatter that the company is a takeover target, he reveals.

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CALL THE CLOSE

Joe Terranova: The commodities trade looks weak to me.

Brian Kelly: As long as money is cheap I’m a buyer.

Jared Levy: I’m a seller.

Mike Gurka: I like the S&P I’d be a buyer on the dip.


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Trader disclosure: On March 24th, 2010, 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); Najarian Owns (BAC) Calls; Najarian Owns (C) Calls; Najarian Owns (CAT) Calls; Najarian Owns (DVN) Calls; Najarian Owns (F) Calls; Najarian Owns (GE) Calls; Najarian Owns (INTC) Calls; Najarian Owns (MCD) Call Spread; Najarian Owns (MOS) Calls; Najarian Owns (RHT) Call Spread; Najarian Owns (YHOO) Call Spread; Terranova Is Short Crude Oil May Futures; Terranova Is Short (CAL), (UAUA), (GS); Terranova Owns (QCOM), (APA), (AMSC); Terranova Owns (GLD) April Puts; Terranova Owns (GS) Puts; Funds Managed By Dennis Gartman Are Short Euro; Stutland Equities Is A Market Maker In VIX And SPX Options; Stutland Owns (TXN)

GE Is The Parent Company Of CNBC

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 (EXR)
Virtus Investment Partners Owns More Than 1% Of (GOK)
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 (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLI)

For Brian Kelly:
Kanundrum Capital Owns (BX)
Kanundrum Capital Owns (EVR)
Kanundrum Capital is Short (EURUSD)


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