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Halftime Pt. 1: Tuesday's Gains, New Momentum Or Oversold Bounce?

Tuesday, 6 Jul 2010 | 1:19 PM ET

Stocks traded higher broadly on Tuesday after record chip sales, optimism out of Europe and the biggest IPO on record gave the bulls a reason to run.

However, a sharp gain in the Dow couldn't ignite bullish sentiment on the Fast Money desk. The traders remained skeptical of Tuesday’s rally.

What must you know about this market?

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I’ve been a bull but Tuesday’s rally came way too easy, admits Joe Terranova. I expected a challenging tape. Going forward I’ll be watching technology , that’s the one sector we can't lose if the market is really building momentum. To me, Tuesday’s gains feel like a technical move higher in an oversold market.

The Vix is off its lows and market bellwether Goldman Sachs is off its highs, adds Jon Najarian. Neither move suggests new momentum. I think the market was oversold and we're bouncing. However into the close I expect it to drift a little higher.

I'm watching action in the bond market, adds Patty Edwards. The 10-year yield fell Tuesday despite a broad market rally in stocks, she explains. That means investors are buyers of both stocks and bonds – typically it’s one or the other. Of course you can't draw conclusions from one day's action, but this is a market ‘tell’ worth watching.

The markets are bizarro, says Brian Kelly, there are a lot of inconsistencies. Not only is the market is up when bond yields are lower, but we also had oil up on Tuesday and consumer shares higher. Something’s not right.

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GOLDMAN GAINS

Fast Money Midday Market Check
The Fast Money traders share their market insights and midday trading advice.

Financials traded to the upside Tuesday with Goldman Sachs leading the gains after JPMorgan upgraded the firm to overweight from neutral.

What’s the play?

In the very short-term I think the market drifts higher and takes GS with it, says Jon Najarian, but there's not a strong commitment to buying this name.

I’d be a buyer of Goldman, says Joe Terranova. Fundamentally they line up as best positioned in the investment banking world.

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TOPPING THE TAPE: TECH

Semi names experienced big gains Tuesday leading the Nasdaq, after the Semiconductor Industry Association (SIA) said worldwide chip sales rose 47.6% in May, helped by strong demand for personal computers, cell phones, corporate information technology, industrial applications and autos.

What’s the trade?

In the space I like Teradyne and Marvell, says Joe Terranova. Also Analog Devices looks well positioned. And I think it’s time to start talking about Google ; I’m a buyer for its attractive P/E.

When I go into the malls the busiest stores are Apple stores, reveals Patty Edwards. Despite issues with the new iPhone people love Apple. That's the trade.

If there’s a ray of sunshine in this bleak market it’s the tech sector, says Brian Kelly. One theme I can get behind is the corporate refresh sector.

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TOPPING THE TAPE RETAILERS

Retailers had traded higher Tuesday but a few names turned negative around lunchtime including Lowes, Best Buy and Tiffany.

What’s the trade?

I’m not that excited about this space right now, says Patty Edwards. Same store sales come out Thursday and they’re going to be against harder and harder numbers. If you must play the space I’d look at Apple because of their must have gadgets.

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TRADING THE GLOBE: CHINA IPO

The traders are closely watching the action in the Agricultural Bank of China, the biggest IPO in history. It's Shanghai pricing came in at the top of the range while it Hong Kong shares coming in at mid-range.

What must you know?

It’s important to see how this trades over the next few days, says Brian Kelly. There’s chatter that it’s among the worst banks in terms of toxic holdings and Beijing is supporting this offering..

They needed $139 billion bailout in 2008, adds Joe Terranova. They could be holding a lot of delinquent loans.

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UNUSUAL ACTIVITY: ALLERGAN

Jon Najarian has spotted unusual action in Allergan.

Despite a pullback Tuesday, options activity suggests this stock could have more upside, he says.

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TOPPING THE TAPE: OIL

The traders are keeping a close eye on the action in oil after the spot price initially climbed but then turned lower around lunchtime.

Shorted dated contracts should be outperforming the longer dated contracts but they’re not, says Joe Terranova. I’m not sure if it’s a noon swoon or a sign the market wants to turn.


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Trader disclosure: On July 6, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Jon Najarian Owns (GS) Call Spreads; Jon Najarian Owns (AAPL) Call Spreads; Jon Najarian Owns (MSFT) Call Spreads; Kelly Is Short (GS); Kelly Owns (BP) Puts; Terranova owns (MON), (AGU), (KO), (XOM), (TEVA), (RDS.A), (GMCR), (UPL), (GS); Terranova owns (GLD) July 123 puts; Terranova owns (GS) JULY 130 CALLS; Terranova owns (GS) JULY 135 CALLS; Terranova is short gold

For Patty Edwards
Edwards Owns (MS) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (GOOG) For Clients
Edwards Owns (INTC) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (YHOO) For Clients
Edwards Owns (HD) For Clients
Edwards Owns (WMT) For Clients
Edwards Owns (GLD) For Clients
Edwards Owns S&P 500 For Clients
Edwards Owns Nasdaq 100 For Clients

For Brian Kelly
Accounts Managed By Kanundrum Capital Are Long Euro
Accounts Managed By Kanundrum Capital Are Short British Pound
Accounts Managed By Kanundrum Capital Are Short (AMZN)
Accounts Managed By Kanundrum Capital Are Short (XLF)
Accounts Managed By Kanundrum Capital Are Short (XLY)
Accounts Managed By Kanundrum Capital Are Short (BCS)
Accounts Managed By Kanundrum Capital Are Short (XLI)
Accounts Managed By Kanundrum Capital Are Short (XLK)
Accounts Managed By Kanundrum Capital Are Short (PCAR)
Accounts Managed By Kanundrum Capital Are Short (NATI)
Accounts Managed By Kanundrum Capital Are Short (BUCY)
Accounts Managed By Kanundrum Capital Are Short (WYNN)

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 (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)


CNBC.com with wires

  Price   Change %Change
DJIA
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NASDAQ
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S&P 500
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ADI
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AEF
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BBBY
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GS
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LOW
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MRVL
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TER
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TIF
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VIX
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SPDR FIN SEL
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SPDR TEC SEL
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AAPL
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GOOGL
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MV SEMI
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