To confirm the rally, the financials need to break through the 200-day moving average and it seems they're getting close in trading Wednesday.
The Financial Select Sector SPRD exchange-traded fund is re-testing its 200-day at $14.85, a key level it hasn't reached since May.
Goldman Sachs , Morgan Stanley and JPMorgan Chase are pushing against their 200-day, noted Jon Najarian, co-founder of optionMONSTER.com.
"It's great to see the financials at least starting to participate," said Najarian. "Now they've just got to get through that 200-day and that's exactly what I think everybody's looking at."
GAMING ALCOA AHEAD OF EARNINGS THURSDAY
Alcoa will kick off third-quarter earnings season when it reports after the closing bell Thursday. Analysts are expecting earnings of 6 cents a share and there is a lot of skepticism surrounding the company, as it hasn't beat expectations in the past, reports CNBC's Melissa Lee.
The Pittsburgh-based producer of aluminum hasn't done well with earnings in the past, echoed Steven Cortes, founder of Veracruz. For that reason, he wouldn't be betting on AA for its earnings report. If it does surprise to the upside, he said China is weak enough that he would still sell a pop on AA.
Alcoa has seen an "explosive move" in options, said Najarian, especially the Oct. 13 calls. Najarian agreed with Cortes that if positive news comes out of the earnings call, quickly sell the AA.
10-YEAR YIELD AT LOWS OF THE SESSION
For every 10 point move in the 10-Year yield , it costs the US government $120 billion in interest, said CNBC's Gary Kaminsky.
"If you start to see interest rates go up, it's going to obviously have a negative impact in terms of our fiscal situation," he explained.
Elsewhere in the Treasury market, Kaminsky said that in the past 24 hours, he learned that many global macro hedge funds who came into this year short the Treasury market with expectations that yields had to go up are still short the Treasury market. He is surprised they haven't started covering their shorts and said it'll take government spending for them to do so.
Cortes said he wouldn't want to join them in shorting Treasurys. He thinks there are many headwinds still facing the US economy, particularly housing. The high end has not yet corrected and is going to, he said. He therefore recommends buying Treasury dips.
CALL TO THE FLOOR: DIAMOND FOODS
On Wednesday's "Fast Money Halftime Report," Michael Mendes of Diamond Foods gave an interview about the company's latest quarter and what's ahead.
Watch the video to see how it went.
CALL THE CLOSE
Cortes is a seller of banks.
"Euphora continues in the markets," said Jared Levy, an options trader. "I'd be a moderate buyer into the non-farm payrolls on Friday."
"It sounds to me like the meltdown will continue," said Kaminsky. "It's the chase to performance as we saw last year in the fourth quarter."
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Trader disclosure: On Oct. 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; Pete Najarian is long (AKAM) calls; Pete Najarian is long (DD) stock; Pete Najarian is long (WFC) put spread; Pete Najarian is long (BP) call spread; Pete Najarian is long (GDXJ) stock; Pete Najarian is long (ABX) call spread; Jared Levy is long (SPX); Jared Levy is short (GLD); Steve Cortes is short (XLF); Steve Cortes is short (BAC); Steve Cortes is short Mex. Peso; Steve Cortes is short Euro; Steve Cortes is short (BIDU); Steve Cortes is short corn; Steve Cortes is long German bonds
CNBC.com with wires.