With stocks shooting higher and now trading near 2010 highs, investors are eager to know if the bullish story just reached its climax or whether these are early chapters of an epic saga.
One day after the Fed revealed the size and scope of the QE2 plan, both the S&P and Dow rallied sharply with some believing the Fed had just put a floor under the market.
A bullish read on consumers added to the positive tone as many retailers posted stronger-than-expected comparable sales for October.
However, that’s not to say the market is without skeptics. Bears argue that the two major drivers of the recent rally – the election and QE2 are fully priced in. They say look out below.
What’s the take away? How should you position now?
Instant Insights with the Fast Money traders
I feel like I’m driving in a gasoline truck at a 100 mph and towards an brick wall, says Brian Kelly. And Ben Bernanke just lit a match. I can’t help but worry that this ends badly.
I also remain skeptical, adds Steve Cortes. The unanimous opinion sees to be the market can not go lower and I find it reminiscent of the rhetoric we heard right before the tech bubble burst.
I want to know what the Fed sees that’s so dire that it’s required them to take drastic steps, muses Guy Adami. I guess it doesn’t matter because the market just wants to go higher. But the market action has the feeling to me of a blow-off top. I don’t know when it ends, but I suspect it ends extraordinarily badly.
CHARTOLOGY WITH CARTER WORTH
Seems like a good time to check in with Oppenheimer's chief market technician Carter Worth and see what patterns in the charts suggest.
Worth tells us, "This is an epic moment in the markets" and that he's looking at the perfect 3 month advance from the August low right back to the April highs.
How the market responds to this reference point is critical.
"The market backed and filled and then backed away – that was all healthy", he says. "Now, if the market rests at the high that will be bullish."
However, that's not to say we're out of the woods - we're not.
"If we keep the steep angle going we set up for a pronounced give back," Worth cautions.
If you're looking for some kind of market tell - Worth suggests watching the financials. He's among the many strategists who thinks the rally can not sustain unless the banks participate.
Technically, "The financials have to come to life and validate the strength of the advance," he says.
In other words, keep an eye on the XLF - "it needs to get above $15.50 to confirm the rally," he says.
"If the financials don’t do that ultimately I think the market will succumb."
TOPPING THE TAPE: BANKS
Banks added fuel to this rally on Thursday after the Wall Street Journal reported the Fed will start to allow healthy and well capitalized banks to increase their dividend payout.
What’s the bank trade?
I thought the rally in JPMorgan on this news was kind of ridiculous, says Karen Finerman. We knew that JPMorgan was going to restore dividends in 2011.
With BofA down about 20% in such as short period of time, it could be due for a bounce, says Steve Cortes. But it’s a trade.
EAR TO THE WALL: WHY IS BANK OF AMERICA SELLING BLACKROCK SHARES?
Fast Money trader Brian Kelly is taking a hard look at Bank of America's sale of a portion of its BlackRock shares.
What does he make of it?
Kelly thinks BofA needs to raise cash for put-backs that could total as much as $50 billion. “I just think the analysts only looked at the private label exposure and there’s a lot more exposure out there."
Kelly crunched the numbers himself. What did he find? Watch the Word on the Street video and find out now!
AFTER HOURS ACTION: STARBUCKS
Shares of Starbucks popped in extended trade after the company ported earnings and sales well ahead of Wall Street expectations Thursday.
Looking at the numbers the java giant reported fiscal fourth-quarter earnings of 37 cents a share, excluding one-time items. Starbucks earned 24 cents a share during the same period a year ago.
Sales for the most recent quarter rose to $2.84 billion, up from $2.42 billion last year.
The company was seen earning 32 cents a share on revenue of $2.77 billion, according to a consensus estimate from Thomson Reuters.
The chain raised its earnings target for the current 2011 fiscal year to a range of $1.41 to $1.47 per share from its prior range of $1.36 to $1.41.
What’s the trade?
With the stock north of $30 and at a 52-week high I think the valuation is stretched, says Guy Adami. But that doesn’t mean it couldn’t go up tomorrow.
> Click here for more coverage of Starbucks earnings
Will Ben Bernanke soon realize that his $600 billion QE2 plan is not enough? Paul Ashworth of Capital Economics thinks QE3 and QE4 could easily be in the cards.
Not only that he thinks it could all happen before the end of next year! Intrigued? Check out our conversation with Ashworth. Watch the video now!
HIGH END EFFECT
As you might expect, we’re seeing signs that the affluent are first experiencing the benefit of Bernanke’s wealth effect.
High end retailers were among the group that surprised the Street to the upside with stronger than expected results. Take a look:
Retail Winners - October Same-Store Sales
What's the trade?
Hain may be a derivative trade from all this, says Karen Finerman.
YOUR MONEY: TAX CUT EXTENSION?
President Obama extended the olive branch Thursday, saying his administration is open to extending the Bush tax cuts to everyone.
In the wake of the GOP sweep, the President appears willing to okay a one or even two-year extension of the cuts for the highest earners, though he still opposes making them permanent.
However, the President does favor making them permanent for families that earn less that $250,000.
Sounds bullish but there may be more than meets the eye. Get all the details from Mike Ryan, the head of UBS wealth management research.
Watch the video now!
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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; Cortes is short (AAPL); Cortes owns (GOOG); Cortes owns (K); Cortes owns (TSN); Cortes owns (CLX); Cortes owns U.S. Treasuries; Cortes owns U.S. Dollars; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; 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 Is Long Russell 2000 Puts; Finerman's Firm Is Long S&P 500 Puts; Finerman Owns (AAPL); Finerman's Firm And Finerman Own (BAC); Finerman's Firm Owns (CMI); Finerman's Firm Owns (M); Finerman's Firm Owns (MCD); Finerman's Firm Owns (SKS); Finerman's Firm Owns (HAIN); Finerman's Firm Owns (YUM)
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