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Market Pros: The S&P Rally Just Beginning

Both the Dow and S&P paused on Monday, with investors fearing that QE2 is now largely priced into the market.

However, a growing number of market pros believe that QE2 is not totally priced into equties. Not by a long short.

What must you know?

Instant Insights with the Fast Money traders

Whether QE2 is right or wrong doesn't matter right now, explains Barry Rithholtz of Fusion IQ - the liquidity is fuel for the market.

QE1 sent the market up 85% in a year, he reminds. QE2 is only half the size of QE1 and the markets aren't nearly as oversold they were were in 2009, but the current 2-month rally of about 8% is probably only the start - it's probably about the first quarter of gains to come. Only a 10% move higher versus a half trillion dollars of QE2 just doesn't compute.

There are long term structural concerns to what the Fed is doing, Rithholtz adds, but asset management isn't concerned about what happens in 5-10 years, it's focussed on the month and quarter. And investors will want to participate in the upside as the train leaves the station.

It's almost as if investors have to be long equities on expectations that the Fed is going to support almost everything in the market, adds Brian Kelly. Yes, it's putting a great deal of faith in the Fed's efficacy but right now there's probably no other choice.

Portfolio managers will likely scramble into year's end, adds Tim Seymour, and that should put a floor under the market.

I can’t help but ask why do gains in the market have to be all about QE2, adds Steve Grasso. There are other catalysts in this market. I think the market is also being propelled by the growing belief that Republicans will win control of the House.

I’m watching the Vix, says Pete Najarian. It’s going lower and lower -- that suggests investors are getting more confident with the environment. The Vix under 19 isn’t something we’ve seen since May.

That level in the Vix makes me take pause, counters Guy Adami. That suggests too many investors are growing complacent. And the banks have not participated in the rally. But there’s no denying all this market has wanted to do lately is go higher. I wouldn’t stand in front of it - not here.

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AMAZING AG TRADE

The amazing ag trade continued Monday with corn prices nearing 2-year highs. From fertilizers, to farm equipment, to food processors - tons of trades are being effected in the corn ecosystem.

How should you position?

Looking at the fertilizer names, I’m seeing a great deal of upside Jan 35 calls trading in Intrepid Potash, says Pete Najarian. That suggests further upside.

In the space, $84 tends to present problems for Agrium , adds Guy Adami. If it breaks down I’d take profits. And I’m worried about food companies such as Smithfield Foods, he says. High corn prices translates into high input costs; I think it trades to $13.50.

In the space I really like Andersons , adds Brian Kelly.

Looking the equipment makers, I think valuations in both Caterpillar and Deere are fair, says Stephen Volkmann of Jefferies, and both may have as much as 20% more upside. However my favorite name in the space is Agco .

I’m also bullish Caterpillar, adds Najarian. Not only do you get exposure to ag, but also mining and homebuilding.

My clients are shorting CAT and buying Deere, says Steve Grasso.

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TOPPING THE TAPE: APPLE

In Monday’s Fast Flash - when we alert you to major stocks hitting major milestones – the traders were awed by the action in Apple, which hit a new all time high.

Meanwhile Microsoft closed little changed despite unveiling a new line of phones running its Windows software with handsets made by Samsung, LG, HTC and Dell.

What’s the trade?

It seems late to the party to me, muses Pete Najarian. It feels a little bit like the Zune. Qualcomm and Broadcom may be downstream plays here but quite honestly this development feels like dead money.

In the space, Akamai, VMWare both look long in the tooth, adds Tim Seymour. I’d trade cautiously.

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NIKE INKING DEAL WITH NFL

Despite Reebok holding the official apparel rights to the NFL for 9 years, Nike is inline to acquire both the sideline rights and uniform rights in 2012, says CNBC’s Darren Rovel. Under Armour will have some limited rights as well.

What’s the trade?

I think it puts Nike in the sweet spot, says Pete Najarian.




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Trader disclosure: On Oct.11, 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; Seymour owns (AAPL), (GE), (GOOG), (INTC), (MON), (MSFT), (MOS), (POT); Pete Najarian owns (DD); Pete Najarian owns (GE); Pete Najarian owns (POT); Pete Najarian owns (BEXP) calls; Pete Najarian owns (BP) calls; Pete Najarian owns (BME) calls; Pete Najarian owns (ERTS) calls; Pete Najarian owns (GDXJ); Pete Najarian owns (BRCD); Pete Najarian owns (CNI); Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (GPRE)
Accounts managed by Kanundrum Capital own (JJG)
Accounts managed by Kanundrum Capital own (SGG)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (SLV)
Accounts managed by Kanundrum Capital own (AGM)
Accounts managed by Kanundrum Capital own (MSFT)
Accounts managed by Kanundrum Capital own (FRO)
Accounts managed by Kanundrum Capital own (GLGC)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (TIP)
Accounts managed by Kanundrum Capital own (UUP)
Accounts managed by Kanundrum Capital are short (HYG)
Accounts managed by Kanundrum Capital are short (SLF)
Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
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 (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 (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Stephen Volkmann
***No Disclosures***

For Barry Ritholtz
***No Disclosures***

For Kevin Cassidy
Stifel, Nicolaus & Company, Inc. makes a market in the securities of Advanced Micro Devices, Inc..
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from Advanced Micro Devices, Inc. in the next 3 months.
Stifel, Nicolaus & Company, Inc. makes a market in the securities of Intel Corporation.
Intel Corporation is provided with investment banking services by Stifel, Nicolaus & Company, Inc. or was provided with investment banking services by Stifel Nicolaus or an affiliate within the past 12 months.
Intel Corporation is a client of Stifel, Nicolaus & Company, Inc. or an affiliate or was a client of Stifel Nicolaus or an affiliate within the past 12 months.
Stifel, Nicolaus & Company, Inc. or an affiliate has received compensation for non-investment banking, securities related services from Intel Corporation in the past 12 months.
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from Intel Corporation in the next 3 months.
Intel Corporation is provided with non-investment banking, securities related services by Stifel, Nicolaus & Company, Inc. or an affiliate or was provided with non-investment banking, securities related services by Stifel Nicolaus or an affiliate within the past 12 months.
Stifel, Nicolaus & Company, Inc. makes a market in the securities of NVIDIA Corporation. Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from NVIDIA Corporation in the next 3 months.



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DJIA
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S&P 500
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AGCO
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AGU
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AKAM
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ANDE
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BRCM
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CAT
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DE
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IPI
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MSFT
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NKE
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QCOM
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SF3
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UA
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VIX
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VMW
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SPDR FIN SEL
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AAPL
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