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Halftime: S&P Breaking Out Or Topping Out

With the S&P sideways, but sitting at the upper end of its range, investors are wondering if bulls are about to charge – sending the market higher in a big way.

Many investors are watching technical signs as their market ‘tell.’ The S&P 500 rose above 1,228, a resistance level that represents the 61.8 percent Fibonacci retracement of the 2007-2009 bear market slide, a key technical indicator.

If the S&P is able to break above 1,235, a two-year intraday high hit earlier in the week, the index could get to 1,250 or 1,260 by the end of the year, says Phil Orlando, chief equity market strategist at Federated Investors in a Reuters interview.

However that’s not to say the market is without headwinds. Europe’s financial woes continue to grab headlines; this time Ireland's opposition Labour party said it will vote against a bailout package when it goes before parliament next week. And there’s always China tightening policy.

With the S&P at a critical point – should you expect it to break out of its range or top out?

Instant Insights with the Fast Money traders

1228 is my point of validation, says Fast Money trader Steve Grasso of Stuart Frankel. I need to see the S&P close above this key technical level. If the market closes at 1230 I can get on board for the bull ride – but not before. If you haven’t bought into the market I’d sit back and wait for the close.

If you want to go long, 1220 appears to be support now, says trader Guy Adami. I’d use that level as a defined stop to trade against.

I think the market is looking tired, says Barry Ritholtz of Fusion IQ. It’s had a great run. I wouldn’t be surprised to see a pullback. I’m cautious.

What do you think? We want to know!

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DEMS DEFY OBAMA

Another headwind facing stocks was generated by published reports which said Democrats in the House of Representatives had defied President Barack Obama and rejected the tax deal he struck with Republicans.

According to Reuters, House Democrats voted at a meeting in Congress against his proposal and called for changes to provisions that they say are too generous for the wealthiest 2 percent of Americans.

Speaker Nancy Pelosi, who has been a key ally of the White House, joined the rebellion against the tax plan, vowing to prevent the House from voting on it.

What’s the takeway?

I wouldn’t take it seriously. If it was serious the Dow would be off much more, says Barry Ritholtz of Fusion IQ.

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SILVER & GOLD

A stronger dollar put pressure on commodities this week. But after the sell off, is it time to get in here or are we in for a larger correction?

What's the trade?

The reversal in gold and silver looks significant to me, says Guy Adami. I think the pressure is on the downside. I suspect the bulls in gold and silver will have to prove themselves. The path of least resistance in both gold and silver may now be lower.

I’m watching the GDX and GDXJ , says Jon Najarian. I’m long put spreads and looking for another 5-7% lower.

There are mixed messages in this part of the market, adds Steve Grasso. Steel and the coal names are moving higher but the energy complex is moving lower although oil is moving higher. That suggests investors need to be selective. For me the trade is long steel and I’d play it long US Steel.

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TOPPING THE TAPE: BANKS

Banks topped the tape again on Thursday, with an upgrade of the asset managers out of Barclays, and Goldman Sachs saying bank pay outs will start early next year.

What’s the takeway?

I’m amazed that banks have the nerve to talk about dividends, says Barry Ritholtz when we know the status of their books and how many bad loans they have. Look at BofA – between the Merril and Countrywide acquisitions, they’re going to be doing write-downs for years to come.

I’d be careful of JPMorgan, says Guy Adami. I think they now have pressure to reinstate the dividend and if they don’t the stock could sell-off.

I’ve got BB&T on the radar, says Jon Najarian. The options action suggests this stock could have a lot more upside. Some speculator are looking for $35 in a year's time.

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COMPELLENT IN TALKS WITH DELL FOR TAKE UNDER

Published reports suggest that Dell is in 'advanced' talks to buy data storage company Compellent for $27.50 a share. Trouble is shares are trading higher that that price.

Considering Compellent shares tripled since the 3Par deal sparked speculation of more deals in the space - is the whole group overvalued?

What’s the takeway?

It’s not uncommon to see these stocks trade for higher than what the price is because investors think the situation will change, explains Steve Grasso.

Sometimes there’s upside call buying in the space which suggests there could be a bidding war – but this time I’m not seeing it, adds Jon Najarian. I think #27.50 is a fair valuation that they will accept.




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Trader disclosure: On December 9, 2010, 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; Jon Najarian owns (BBT), is short (BBT) calls; Jon Najarian owns (SHAW), is short (SHAW) calls; Jon Najarian owns (MSFT), is short (MSFT) calls; Jon Najarian owns (IBM), is short (IBM) calls; Jon Najarian owns (CME), is short (CME) calls; Jon Najarian owns (CBOE), is short (CBOE) calls; Jon Najarian owns (XLF) call spreads; Jon Najarian owns (GS) call spreads; Jon Najarian owns (JPM) call spreads; Jon Najarian owns (BAC) call spreads; Jon Najarian owns (ERTS) call spreads; Jon Najarian owns (GDX) put spreads; Jon Najarian owns (MGM) put spreads; Jon Najarian owns (SIRI); Jon Najarian owns (C); Jon Najarian owns (SFD); Jon Najarian owns (GDXJ) put spreads; Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO), (JPM), (LIT), (LPX), (MOT), (MHY), (NDAQ), (PFE), (PRST), (S), (X)

For Barry Ritholtz
Fusion IQ Clients Own (C)
Fusion IQ Clients Own (SBNY)
Fusion IQ Clients Own (PCS)
Fusion IQ Clients Own (ACI)
Fusion IQ Clients Own (UNH)
Fusion IQ Clients Own (AGP)
Fusion IQ Clients Own (SU)
Fusion IQ Clients Own (LCC)
Fusion IQ Clients Own (WDC)
Fusion IQ Clients Own (CVE)
Fusion IQ Clients Own (SMH)
Fusion IQ Clients Own (SBGI)
Fusion IQ Clients Own (ACUR)
Fusion IQ Clients Own (EK)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (AAPL)
Stuart Frankel & Co and it’s partners own (CSCO)
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 (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 Its Partners Own (UNM)
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)

For Steve Chick
No disclosures




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