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Market Pros: Are Bulls Getting Ahead Of Themselves?

Bulls raced down Wall Street Wednesday, trampling any and all bears that dared to stand in their way.

By the end of trading, the Dow had again surged sharply higher while the S&P broke above another key technical level – 1175 the 78.6% retracement of the April-June declines.

Considering the S&P is up well over 10% since the beginning of September, should you bet the next leg is lower? Or is this a case of buy high and sell higher?

Instant Insights with the Fast Money traders

Looking at the technicals, overhead resistance is very strong in the market right now, explains Joe Terranova. 1180 is the level where the market broke down back in April. That will likely generate strong headwinds. Also the price action in Intel and JPMorgan was very disappointing. That's concerning. I think the prudent trade is long puts.

I agree that we may have come too far too fast and that investors should be buying S&P puts to protect their portfolio, says Karen Finerman.

I’m watching the financials as my tell, says Pete Najarian. The Bank ETF keeps pushing against the 200-day but not breaking through it. And on Wednesday it pared gains into the close with the financials barely ending in positive territory – a sharp contrast to most other areas of the market.

I agree that the way Intel and JPMorgan traded is concerning, says Brian Kelly. I think the market is still climbing on expectations of negative real interest rates. But the theme is getting a little long in the tooth and that makes me nervous.

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TOPPING THE TAPE: TECH

You’d think Intel’s earnings beat would drive the tech sector, but the traders say another catalyst pushed the Nasdaq to its 5th consecutive day of gains – Apple breaking above $300.

How should you trade now?

Remember that Apple is 20% of the Nasdaq, says Brian Kelly. I really think this space is all about specific stock stories. Momentum in Apple, however, just keeps driving this stock higher.

Longer term I think Apple could face challenges if iPads begin to cannibalize other areas of their business, adds Simon Baker. I can’t imagine people spending $1600 for an iMac if they can get an iPad for $600.

I think the iPad will cannibalize netbooks, adds Joe Terranova. That’s the trade.

If you're looking for a trade, elsewhere in tech, I like Cirrus , adds Simon Baker. I’m a buyer with a stop around $14.50.

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TECH BREAKOUT: NASDAQ 100 ETF (QQQQ) AT NEW 52-WEEK HIGH

The Fast traders are also closely watching the action in the Nasdaq 100 ETF which hit a new 52-week high.

In fact, it’s within a stone’s throw of the high it hit during the 2007 bull.

What should you make of it?

If Apple continues to be a rock star, it may be necessary for the Nasdaq to rebalance and that could pressure the Quad Q’s, says Simon Baker.

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TOPPING THE TAPE: COMMODITIES

Weak dollar trades were back in play on Wednesday with gold and Freeport McMoRan two noteworthy beneficiaires.

On Tuesday Fed minutes all but confirmed the widely held belief that the central bank was about to flood the economy with QE2.

How should you position?

I expect the lower dollar trade remains in play through the end of 2010, says Joe Terranova. I’m bullish gold , copper, oil and even to the softs to some extent.

I’m worried about gold, says Brian Kelly. It’s had such a run I sold a third of my position last week and I’ll probably sell another third around $1,400.

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UNUSUAL ACTIVITY: TSO

Pete Najarian has spotted unusual options action in Tesoro .

A larger than usual volume of Oct 14 and Nov 15 calls leads Najarian to speculate big investors think this stock could make a sharp move higher.

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WHOA, ST. JOE

Shares of St. Joe fell sharply on Wednesday after famed short seller, hedge fund manager David Einhorn warned that the real estate company's development plans have fallen flat, leaving it with empty subdivisions and inevitable writedowns.

Einhorn, who made these market moving comments while speaking at the Value Investing Congress in New York, said he traveled to St. Joe's RiverTown development, located just south of Jacksonville, Florida. "The proposed development site looks more like a moonscape than a luxury development," he said.

What’s the takeaway?

Einhorn is the investor who profited from his bets against Lehman, reminds Karen Finerman. He’s a smart and thorough investor. There could be something here.

But to be fair there are a lot of other smart investors on the other side of Einhorn’s trade, adds Melissa Lee. They include:
Bruce Berkowitz 26.8M
Third Ave Management 2.2M
Source: Gurufocus.Com

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AFTER HOURS ACTION: APOLLO GROUP


In extended trade, for-profit education provider Apollo Group dropped about 8% after the company withdrew its fiscal 2011 outlook, citing an uncertain regulatory environment and said new enrollment will take a significant hit in the coming quarter.

"The decline in University of Phoenix new degreed enrollment experienced in the fourth quarter of fiscal year 2010 is expected to accelerate during the first quarter of fiscal 2011, resulting in a significant year-over-year decline," they said in a statement.

What’s the takeaway?

Their business model is making a hard change, says host Melissa Lee and investors don’t like hard changes.

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BREAKING NEWS: STEVE RATTNER

CNBC’S David Faber tells the desk that Steve Rattner has likely to reached some kind of settlement with the SEC over his role in a so-called play-for-play scheme involving the New York State pension fund and the firm Quadrangle.

It’s unclear whether the AG will be a party to the settlement and things are in flux so it’s not a done deal, Faber adds.

However, we could hear something as soon as Thursday.







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Trader disclosure: On Oct.13, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman owns (GOOG); Finerman’s Firm owns (IBM); Finerman and Finerman’s Firm own (JPM); Finerman and Finerman’s Firm own (BAC); Finerman’s Firm own (MSFT); Finerman’s Firm owns (RIG); Finerman’s Firm owns (WMT); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Terranova Owns (APA), (AAPL), (IBM), (OXY), (RSH), (UPL), (XBI), (JOYG), (C), (AXP), (SWN), (AGU), (EOG), (HES), (OIH), (ORCL), (SU), (VRTS), (FTO), (RIG), (PEP), (POT), (CRM), (CF), (VMW); Terranova Owns (AAPL) puts; Pete Najarian owns (DD), (TSO), (YHOO), (AKAM), (BMC), (F), (LVS); Simon Baker Owns (SLW), (IGTE); Simon Baker's Firm Owns (SLW)

For Anthony Scaramucci
Scaramucci and SkyBridge Capital own (RL)

For Brian Kelly
Accounts managed by Kanundrum Capital own (ANDE)
Accounts managed by Kanundrum Capital own (ADM)
Accounts managed by Kanundrum Capital own (GS)
Accounts managed by Kanundrum Capital own (JEF)
Accounts managed by Kanundrum Capital own (MSFT)
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 (GPRE)
Accounts managed by Kanundrum Capital are short U.K. Pound
Accounts managed by Kanundrum Capital are short Mexican Peso

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners own more than 1% of (ABAX)
Virtus Investment Partners own more than 1% of (ALK)
Virtus Investment Partners own more than 1% of (AMKR)
Virtus Investment Partners own more than 1% of (CASS)
Virtus Investment Partners own more than 1% of (CSVI)
Virtus Investment Partners own more than 1% of (IGE)
Virtus Investment Partners own more than 1% of (LDR)
Virtus Investment Partners own more than 1% of (LPHI)
Virtus Investment Partners own more than 1% of (MGRC)
Virtus Investment Partners own more than 1% of (NRCI)
Virtus Investment Partners own more than 1% of (DBV)
Virtus Investment Partners own more than 1% of (XLB)
Virtus Investment Partners own more than 1% of (XLP)
Virtus Investment Partners own more than 1% of (XLY)
Virtus Investment Partners own more than 1% of (XLF)
Virtus Investment Partners own more than 1% of (XLI)
Virtus Investment Partners own more than 1% of (XLU)
Virtus Investment Partners own more than 1% of (SUBK)
Virtus Investment Partners own more than 1% of (WDFC)
Virtus Investment Partners own more than 1% of (YDNT)
Virtus Investment Partners own more than 1% of (DRYS)

For Kate McShane
An employee of Citigroup Global Markets Inc. is a director of (BBY)
Kate McShane owns (BBY)
Citigroup is a market maker in (COLM), (FINL), (SPLS), (BBBY), (ORLY)
Citigroup has a significant financial interest in relation (NKE), (VFC), (BBY), (ODP), (SPLS)
Citigroup received investment-banking compensation within the past 12 months from (LIZ), (VFC), (ODP), (AZO), (SPLS)
Citigroup received compensation for non-investment banking services from (FL), (LIZ), (NKE), (PVH), (RL), (VFC), (BBY), (ODP), (OMX), (WSM), (AZO) (COLM), (SPLS) (BBBY) in the past 12 months
Citigroup had within the past 12 months, (LIZ), (VFC), (ODP), (AZO), (SPLS) were investment banking clients

For Mike Khouw
Cantor Fitzgerald makes a market in (FCX)

For Steve Sakwa
***No Disclosures***

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