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Halftime: S&P – Next Level Of Resistance

Thursday, 4 Nov 2010 | 1:17 PM ET

Risk-on! You could almost hear the rallying cry up and down Wall Street on Thursday as bulls pushed both the Dow and S&P sharply higher.

Buyers appear convinced that Ben Bernanke is not only committed to driving stocks higher but also has his hand under the market – making sure it doesn’t pull back too far, either.

Meanwhile, President Obama may have also generated tailwinds after he signaled a new willingness to extend the Bush tax cuts for all income levels.

That’s not to say the market is without skeptics. The S&P is now flirting with its highs for the year and some investors believe that could be problem with so much already priced in.

What’s the trade? How should you position now?

Instant Insights with the Fast Money traders

I’m a non-believer in the rally but I respect the price action, says Guy Adami. The level to watch now is 1219.80. That was the high we made back on April 26th. Can the market push above that?

I wouldn’t fight the tape either, says Steve Grasso. But I’m somewhat skeptical that the bulls are off to the races until the S&P crosses 1219.80. Two catalysts are now out of the market; the election and the FOMC. I’d steer clear for now.

Fast Money Midday Market Check
The Fast Money traders share their market insight and midday trading advice.

It seems to me Ben Bernanke may be the equivalent of a put (protection) under this market, muses Jon Najarian. If QE2 doesn’t work the Fed won’t just walk away. As a result, I’d stay with the momentum. And chatter about an extension of the Bush tax cuts and dividend taxes are icing on the cake.

It’s a cliché, but I wouldn’t fight the Fed either, says Patty Edwards.

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FED RALLY: BANKS, HOUSING

It appears the Fed may be achieving at least one of the things it set out to do – buoy the stock market by driving bank stocks higher.

Financials, which have lagged the markets, came back strong on Thursday with Goldman Sachs breaking above its 200-day moving average.

Also the homebuilders surged – presumably on the belief that QE2 will drive down mortgage rates.

What’s the trade?

In this space, I’m keeping an eye on Jefferies , says Guy Adami. Also keep an eye on Mastercard and Visa.

It looks like the space is basing, adds Jon Najarian. Morgan Stanley and Bank of America have underperformed and now I think they could outperform.

And in housing, I'd play Home Depot up to $34, adds Adami.

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TRADING SAME-STORE SALES

It was a mixed bag for October retail sales with some of the stand out reports coming from the high-end retailers. Take a look:

Retail Winners - October Same-Store Sales

RetailerEst. Actual
Nordstrom2.7%3.4%
Saks2.0%8.1%
Macy's1.6%2.5%
Gap-2.5%2.0%
Limited6.1%9.0%


What’s the play?

Rather than focus on the winners I'm looking at the losers and one of them was Kohl’s , explains Patty Edwards They blamed the weather for weak numbers, but I like their management team. If the stock sells off on the news I’m a buyer. And if you’re looking at specialty retail, I’d play the momentum in The Buckle or Zumiez.

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VIX CRUSHED

Take a look at the 2-day sell off in the volatility index as Ben's buying sparks the risk-on trade with the Vix now look to close at the lowest levels in over 6 months.

A 15% drop in 2 session tells me a lot about investor’s perception of risk, says Jon Najarian. There’s a belief that Ben Bernanke has his hand under this market.

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UNDER THE RADAR: LUMBER LIQUIDATORS (LL)

Let's get to an under the radar loser in Thursday’s session – Jon Najarian is watching the sell off in a different kind of housing stock, Lumber Liquidators.

What must you know?

The move in this stock is very interesting, says Jon Najarian. The stock traded above 31 in the spring of this year but has since fallen back to levels of a year ago. It says a lot about the anticipation of recovery in housing and that it may not quite be there.

I’m also watching United Rentals , he adds. They rent equipment for home sites. They’re performing well and that’s a positive sign.


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Trader disclosure: On November 4, 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) and (MSFT); Adami’s wife works at Merck; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO) (MOT), (NDAQ), (PFE) and (PRST); Jon Najarian owns (CNX) short calls; Jon Najarian owns (HES) short calls; Jon Najarian owns (NOV) short calls; Jon Najarian owns (RIG) short calls; Jon Najarian owns (APC) short calls; Jon Najarian owns (DO) short calls; Jon Najarian owns (BAC) short calls; Jon Najarian owns (GS) short calls; Jon Najarian owns (AAPL) short calls; Jon Najarian owns (JWN) short calls; Jon Najarian owns (LIZ) short calls

For Patty Edwards:
Edwards owns (SLB) for clients
Edwards owns (PCL) for clients
Edwards owns (GS) for clients
Edwards owns (GOOG) for clients
Edwards owns (AAPL) for clients
Edwards owns (GLD) for clients
Edwards owns (JCG) for clients
Edwards owns (COH) for clients
Edwards owns (SBUX) for clients
Edwards owns (GLD) for clients
Edwards owns (PGM) for clients
Edwards owns (WFMI) for clients

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AAPL)
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 (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)
Stuart Frankel & Co and it’s partners are short (MCD)
Stuart Frankel & Co and it’s partners are short (AAPL)
Stuart Frankel & Co and it’s partners are short (RHI)

For Rich Ilczyszyn:
***No Disclosures***

CNBC.com with wires.

  Price   Change %Change
DJIA
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S&P 500
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BAC
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BKE
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HD
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JEF
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KSS
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LL
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MA
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MS
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URI
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V
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SPDR FIN SEL
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ZUMZ
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MCD
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