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Halftime: Embrace Or Doubt This Rally?

The bulls drove the S&P higher on Thursday after new economic data suggested the economy may not be falling off a cliff, after all.

New claims for unemployment insurance fell more than expected last week to their lowest level in two months and the U.S. trade deficit narrowed more than forecast in July with exports shooting to their highest level since August 2008.

Also, the Fast Money desk is keeping an eye on the Greek bond market; with the latest developments suggesting that debt worries in Europe may be abating: The yield on the 2 year Greek bond fell below 10% for the first time since mid-August according to Miller Tabak's Peter Boockvar.

Considering fears of a double-dip recession have kept investors at bay - and the stock market in a tight trading range for several months - is everything about to change?

Instant Insights with the Fast Money traders

There may be reasons to doubt the rally, explains Steve Grasso. Fundamentally, the jobless claims were estimated for 9 states. Also, we’re not seeing any volume which could be a sign there's little conviction behind the gains.


Right now, we’re sitting between the 100-day and 200-day moving average, Grasso adds. Personally, I’ve got to see the market close above 1131 before I can feel excited.

1120 is the key level I'm watching, says Scott Nations. That’s halfway back between the April high and the July low. I’m a buyer into 1120 but then I'd take profits. I don’t see the market having enough momentum to make a really big move – say to 1200.

I’ve been very constructive on the market but I’ve now take profits on all my longs, says Steve Cortes. I think the market looks frothy.

I’ve been bearish and remain bearish until we close above 1135 in the S&P, adds Guy Adami. However, it really depends on your view of the broad market. Mine is that we’re at the upper end of the range and I’d look to take profits. In the meantime I do think you can play stock picker. I like Human Genome and Akamai .

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TOPPING THE TAPE: BANK OF AMERICA, JPMORGAN

The traders are keeping a close eye on banks stocks in the wake of commentary from widely followed Rochdale Securities analyst Dick Bove who said some of the nation's larger banks could be takeover targets as the sector remains undervalued.

Bove compiled a list of 16 larger banks that he sees as takeover targets. Among the most well-known are Capital One Financial , SunTrust and Zions Bancorp .

(For more on Bove's call click here to go to Sixteen Larger Banks Are Ripe Takeover Targets: Bove)

Also noteworthy, on Thursday Bloomberg reported that Deutsche is considering a share sale of up to 9 billion euro.

What’s the trade?

I think financials have bottomed, says Steve Cortes, because it looks like housing has finally bottomed. However I don’t think they surge higher. I don’t want to be long but I also don't want to be short.

Around $13 I think BofA is interesting, says Guy Adami. If you believe in the tape - which I don't - and want to be in the banks I think you get a lot of juice from this stock.

I’m seeing unusual volume in the July 20 calls in XL Capital, says Scott Nations. A published report suggested that the company would be an attractive acquisition for Berkshire Hathaway.

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TOPPING THE TAPE: OIL

The energy sector traded in the green with bullish investors embracing more risk.

What’s the play?

I’m noticing a rotation of investors coming out of defensive names and into energy, explains Steve Grasso.

In the space I’m watching Apache, says Guy Adami.

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TOPPING THE TAPE: ADOBE

Tech investors have been closely tracking the ongoing conflict between Adobe and Apple - a conflict that’s prevented much of Adobe's web software to run on iPhones and iPads.

But both stocks traded in the green after an Apple press release hinted at a resolution.

What’s the trade?

If you believe in the tape look at Apple, says Guy Adami.

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MARKET BUZZKILL: GOLD

With risk trades back on, safety trades were turned off. Both gold and the gold miners traded lower in the wake of stronger than expected economic data.

What’s the trade?

I’d get out and get short, says Steve Cortes. After rallying for 6 straight weeks gold looks overbought. It failed against 1270 – its June highs. And the sentiment is so bullish I can’t imagine where new money comes from.

I don’t see any reason to put new money into gold either, adds Scott Nations.

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CALL OF THE DAY: SELL RIMM

The downgrades keep coming for RIM with BGC analyst Colin Gillis joining the pack of nay-sayers and initiating RIM with a Sell rating.

Isn't he a little late to the party?

Find out why he made the call now. Check out our exclusive interview with Colin Gillis in the video above or click here!


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Trader disclosure: On Sept. 9th, 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), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Cortes Is Long British Pound; Cortes Is Short Gold; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST); Nations is long (MSFT)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Colin Gillis
BGC Financial LP expects to receive, or intends to seek, compensation for investment banking services from (RIMM) within the next 3 months.


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