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Bullish Investors Push Stocks Higher

Thursday, 8 Jul 2010 | 6:13 PM ET

Wall Street rose for a third straight day on Thursday as investors were encouraged to see jobless claims fall and a handful of large retailers report solid sales.

Stocks have regained their footing after a slew of poor data had raised fears of a double-dip recession. But low market volume suggested investors are still skeptical, and few expect to see a sustained rally.

With Thursday's gains, the Dow Jones Industrial Average is no longer in correction territory. It's only off 9.5% since its April highs.

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It was positive to see the International Monetary Fund raise its forecast for China, says Pete Najarian of optionMONSTER.com, by projecting its economy to grow by 10.5 percent on an annual basis this year. At the same time, Australia's employment rose sharply in June, according to a report by the Bureau of Labor Statistics. The hiring is in the energy sector, Najarian says, which is being exported to China. So looking forward to the next trade in the marketplace, he's going with a railroad stock: CSX .

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"Options everyday. Very active. Very hot. Going for upside calls," he says. "I got involved with CSX because I think the rails is the way to play China."

Karen Finerman of Metropolitan Capital Advisors maintains that the market has been oversold. She says investors are interpreting data in a more positive light and that's pushing stocks higher.

The problem is traders have been spending too much time thinking about macroeconomic conditions, says Joe Terranova of Virtus Investment Partners. Instead, look at the tape in front of you.

"I can't even figure where the trade is going to be over the next week," he says. "How can I figure it out for next year?"

What you can do, Terranova says, is look at earnings. He thinks earnings expectations are going to be "solid" and expects the rally to continue for the next few days. He suggests considering Amazon.com and Google right now.

Like Terranova, Guy Adami of Drakon Capital also thinks the rally has legs to carry it through the next few days. He suggest using the 1040 level in the S&P 500 as a guide. Play things on the long-side, he says, raising your stops along the way.

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BULL MARKET OR BS?

The economy is going to be okay, says Joseph Lavorgna, a chief US economist at Deutsche Bank while on Thursday's Fast Money.

Lavorgna brought a bullish view to the program, talking down the possibility of a double-dip recession. They are rare, he says, and often tied to crisis. The market seems to worry about a double-dip because stimulus could run out, but he thinks it would take more than that.

Here's another positive sign—historically, the multiple has been at 15, but DB is using 16 because rates are low. He calls 15 very conservative.

Watch the video for his full comments—Lavorgna appears at approximately 7:05.

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ANALYZE THIS: SELLING INTO STRENGTH

The Dow might have posted its best three-day gain since May 12, but many people remain bearish and Dennis Gartman is one of them.

This is just a summer rally, says the author of The Gartman Letter. Contrary to Doug Kass of Seabreeze, he doesn't think the market made its low for the year Tuesday. The lows are getting lower and the higher are getting higher, he says. There's always a rally after a decline.

Gartman recommends selling into strength and sell the German market in particular. He plans on getting short of Europe.

Elsewhere in the market, Gartman still likes gold . He notes that earlier this week, the Bank for International Settlements said it loaned billions of dollars backed by gold to commercial banks. Gold held with news of these "gold swaps".

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CALL OF THE DAY: WHITNEY SLASHES GOLDMAN

Meredith Whitney slashed her estimates for Goldman Sachs and Morgan Stanley Thursday. The highly regarded analyst sliced her second-quarter earnings estimate on Goldman to $1.70 a share from $4.75 a share. She cut Morgan to 40 cents a share from 68 cents a share.

The cuts were surprising to Guy Adami of Drakon Capital, who says he's never seen someone cut that significantly. He says Whitney has proved her predictions to be true in the past and has confidence in her moves this time around.

Karen Finerman of Metropolitan Capital Advisors likes Goldman at current levels and calls it a value play.


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Trader disclosure: On July 8, 2010, 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 (GOOG), (AMZN), (MON), (APC), (GMCR), (MYL), (MRVL), (BAC), (ADI), (ADBE), (AKAM), (HES), (CVS), (AXP), (EMC), (ABT); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman’s Firm owns (AEO); Finermans’ Firm owns (ANF); Finerman’s Firm owns (BAC) stock and calls; Finerman and Finerman’s Firm own (BAC) preferred; Finerman and Finerman’s Firm owns (BBY); Finerman owns (BP) calls; Finerman owns (C); Finerman and Finerman’s Firm own (CVS); Finerman owns (GLW); Finerman & Finerman’s Firm owns (GOOG); Finerman & Finerman’s Firm owns (HPQ); Finerman & Finerman’s Firm owns (IBM); Finerman & Finerman’s Firm owns (JPM) stock & calls ; Finerman owns (SKS); Finerman’s firm owns (PM); Finerman’s Firm owns (RIG); Finerman’s Firm owns (TGT); Finerman’s Firm owns (WMT); Finerman’s Firm is short (IJR); Finerman’s Firm is short (IWM); Finerman’s Firm is short (MOY); Finerman’s Firm is short (SPY); Pete Najarian owns (DD) Calls; Pete Najarian owns (TJX) Calls; Pete Najarian owns (USB); Pete Najarian owns (CSX) Calls; Pete Najarian owns (CNI) Stock, short Calls; Pete Najarian owns (GNW) Calls; Pete Najarian owns (HPQ), short calls; Pete Najarian owns (MRVL), short calls; Pete Najarian owns (CMC) a call spread; Pete Najarian owns (TCK), short calls; Pete Najarian owns (AMD) calls; Pete Najarian owns (LLC) a call spread; Pete Najarian owns (C) calls; Pete Najarian owns (BAC); Pete Najarian owns (BBY) a call spread

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Joe LaVorgna

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Dennis Gartman

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J.P. Mark
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Alex Hamilton
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