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Pro Trader: Chase For Performance to Drive Year-End Rally

Wednesday, 1 Dec 2010 | 5:54 PM ET

Strong economic data sent both the S&P and Dow exploding higher Wednesday. Are the bulls off to the races?

Or was Wednesday’s market action 2010’s last moment of glory?

Instant Insights with the Fast Money traders

Guy Adami suggests keeping a close eye on technicals. "1173 is a key level in the S&P," he says. "It held like a rock and I think investors now have a defined stop. However, I can’t help but worry at some point the market takes a turn for the worse."

Joe Terranova thinks that the strong economic data may continue to buoy the market and excite investors. "If Friday's jobs reports shows private sector job growth is better than expected I think this rally could have legs," he explains.

CNBC contribution editor Gary Kaminsky tells the desk to look for a chase for performance largely because of a relative underperformance by mutual funds. “In the end of August we had the highest number of mutual funds underperforming their benchmark in almost a 20 year period,” he says.

In other words, there’s a population of money managers underperforming and he thinks they will be aggressively trying to catch up to the market. "I can’t imagine anything happening to change that though the end of the year."

Bull Market or BS?
Insight on whether today's rally is a big game of catch up for lagging money managers, with Gary Kaminsky.

And Joe Terranova, says money mangers won’t have the entire month to play catch up. "They really only have until the middle of the month," he adds, suggesting the rally should continue in the short-term.

Meanwhile, on the Halftime Report Todd Gordon of Forex.com told the desk he remains skeptical of the rally.

Gordon thinks Australia should be confirming this rally and its not. ”The euro was up .75% while the Aussie group against the rest of the G10 was up .25%, he explains. "I take that to mean the European bounce was nothing more than a short covering rally. The weakest currency was up the most. If it were a true risk-on rally the Australian group should be up, much more.”

”And to take it a step further – look at the safe haven currencies such as the yen and the Swiss franc," Gordon adds. "They should be down much more if the rally is for real.”

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MATERIALS AND INDUSTRIALS

Like so many of this year's biggest market rallies and selloffs, the action began in China.

Investors bid commodities higher after new data showed that nation’s purchasing manufacturing index or PMI rose to a 7 month high in November, beating expectations, with output and export orders fueling the rise.

Word on the Street
The Fast Money traders take a look at today's top business stories.

Investors considered the trend bullish; interpreting results to mean that Chinese demand for materials and resources was getting stronger.

What’s the trade?

In the space I’d look at Honeywell and Cooper Industries, says Guy Adami. I don’t like the broader market but I like these names.

I added to my exposure in Freeport McMoRan, adds Joe Terranova. I think the 2011 trade is long copper.





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Trader disclosure: On December 1, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (WFT) call spread. Pete Najarian owns (MEE) call spread. Pete Najarian owns (F) bonds. Pete Najarian owns (GDXJ) call spreads. Pete Najarian owns (GRS) calls. Pete Najarian owns (TCK) call spread. Pete Najarian owns (C), (PFE), (CNI) and (DOW). Karen Finerman owns (AAPL) and (BAC). Joe Terranova Owns (FCX), (UPL), (C), (PEP), (VRTS), (OXY), (AXP), (GS), (POT), (AAPL), (NKE) and (OIH). Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC) and (MSFT). Stephen Weiss owns (VZ), (MEE), (UPS), (JWN), (QCOM), (TBT), (COP) and (DVN). Steve Cortes is short (UNP). Steve Cortes owns (GS), (MS), (BAC) and (CME). Steve Cortes is short German DAX. Steve Cortes is long U.S. Dollar vs. Mexican Peso, Euro, Australian Dollar Steve Cortes is long U.S. 2-year treasury notes.

KAREN FINERMAN
Finerman’s firm owns (BKS)
Finerman & Finerman’s Firm owns (JPM)
Finerman & Finerman’s Firm owns (MSFT)
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 and Russell 2000 puts

JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (ALK)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EPR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (MGRC)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

GUY ADAMI
Adami’s wife works at Merck

MIKE KHOUw
Cantor Fitzgerald makes a market in (AAPL)
Cantor Fitzgerald makes a market in (ALTR)
Cantor Fitzgerald makes a market in (ANR)
Cantor Fitzgerald makes a market in (ARMH)
Cantor Fitzgerald makes a market in (BAC)
Cantor Fitzgerald makes a market in (C)
Cantor Fitzgerald makes a market in (CSCO)
Cantor Fitzgerald makes a market in (DDAIF)
Cantor Fitzgerald makes a market in (F)
Cantor Fitzgerald makes a market in (FCX)
Cantor Fitzgerald makes a market in (FDX)
Cantor Fitzgerald makes a market in (GM)
Cantor Fitzgerald makes a market in (JPM)
Cantor Fitzgerald makes a market in (LLTC)
Cantor Fitzgerald makes a market in (MEE)
Cantor Fitzgerald makes a market in (MOT)
Cantor Fitzgerald makes a market in (MSFT)
Cantor Fitzgerald makes a market in (NVDA)
Cantor Fitzgerald makes a market in (QCOM)
Cantor Fitzgerald makes a market in (RIMM)
Cantor Fitzgerald makes a market in (TSN)
Cantor Fitzgerald makes a market in (TXN)
Cantor Fitzgerald makes a market in (UPS)
Cantor Fitzgerald makes a market in (VZ)

DENNIS GARTMAN
Funds managed by Gartman own (MSC),
Funds managed by Gartman own (RJA)
Funds managed by Gartman own (BPT)
Funds managed by Gartman are short (DB)
Funds managed by Gartman are short the S&P 500
Funds managed by Gartman are short the Euro
Funds managed by Gartman are short the Japanese Yen
Funds managed by Gartman own Gold

BRIAN KELLY
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 (JPM)
Accounts Managed By Kanundrum Capital Own (C)
Accounts Managed By Kanundrum Capital Own (WFC)
Accounts Managed By Kanundrum Capital Own (RDC)
Accounts Managed By Kanundrum Capital Own (ARMH)
Accounts Managed By Kanundrum Capital Own (AAPL)
Accounts Managed By Kanundrum Capital Own (FCX)
Accounts Managed By Kanundrum Capital Own (QCOM)

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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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