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Market Pros: Bank Stocks To Power S&P Higher?

Friday, 10 Dec 2010 | 5:46 PM ET

Bulls must have been pleased with themselves as they retired for the week-end and reflected on a milestone that was a long time in coming.

After two years of fits and starts on Friday, the S&P 500 ended the session at its highest level since the week Lehman Brothers collapsed in 2008.And technicals suggest more gains could follow.

For the second consecutive day the S&P closed above 1228 - a level of past resistance and the closely watched 61.8 percent retracement of its drop from late 2007 to March 2009.

"Surpassing 1,227-1,229 was important,” explains Chris Burba, a short-term market technician at Standard & Poor's in a Reuters interview. That’s significant because "when you violate resistance, there's a tendency for the S&P to really go higher."

What will drive further gains? The Fast Money traders suggest financials could get the job done. How should you position, now?

Instant Insights with the Fast Money traders

I do find opportunity is in the financials, says OptionMonster Jon Najarian. All this week they’ve been reacting very well. I particularly like the action in the XLF. It wouldn’t surprise me to see banks reinstate dividends in the same way that GE did, which the market would take as a bullish sign.

Best Ways to Play China
China stocks rebound overnight on trade data, with the Fast Money traders.

I think banks are attractive too, says Fast trader Karen Finerman of Metropolitan Capital. In addition to dividends, it wouldn’t surprise me to see buybacks with bank trading at such low levels. Buybacks could also generate tailwinds for the sector

If you're looking for a specific trade I expect Citi, to trade $5 before it takes out $4.50, says trader Joe Terranova of Virtus. Broadly I expect to see is a rotation out of other sectors and into banks, which had lagged. Investors are about to play a game of catch-up.

I can’t get on board with the bank trade, counters trader Patty Edwards of Trutina. I need to see employment get better as well as better loan growth. Also I'm concerned about banks because a lot of those modified loans are starting to go bad again. Quite frankly I htink there’s still a lot of ‘crap’ on those balance sheets.


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WHAT’S WRONG WITH GOLD AND SILVER?

What is wrong with gold and silver? Both metals tumbled this week while the dollar and stocks stayed flat.

What’s the trade?

I’m a buyer of gold on weakness, says Brian Kelly. If China raises rates it will be a sign of inflation – that’s good for gold. And if they don’t raise rates – that suggests the commodities trade is one – also good for gold.

If gold doesn’t pop on Monday, I’d get out of the way, counsels Jon Najarian. I think it gold could be setting up for a sell-off depending on the news out of China over the week-end.

I think we’re at a point in the recovery when investors needs to ask themselves if they want to be long gold – or long copper and energy, says Joe Terranova. I think the answer is copper and energy.

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HEALTH CARE M&A

The traders suggests putting health care names on the radar after Communiity Health made an unsolicited bid to acquire the Tenet for $6/share.

Tenet rejected its larger rival's offer as "opportunistic" and "inadequate" generating speculation that other hospital companies, either publicly traded or privately held, are likely to be interested in Tenet

What’s the trade?

I sold my shares of Community Health on the run up, says Patty Edwards.

I’m long Tenant May 6 calls because I think there will be a higher bid from Community Health, and perhaps another entity, says Karen Finerman.




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Trader disclosure: On December 10, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Finerman's firm is short (IJR); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman's firm is short (MDY); Finerman's firm is long S&P puts; Finerman's firm is long Russell 2000 puts; Finerman Owns (AAPL); Finerman's Firm Owns (ARO); Finerman Owns (BAC); Finerman Owns (JPM); Finerman's Firm Owns (JPM) Leaps; Finerman's Firm Owns (KFT); Finerman's Firm Owns (THC) Calls; Jon Najarian owns (BBT) call spreads; Jon Najarian owns (BAC) call spreads; Jon Najarian owns (DF); Jon Najarian owns (DRYS), is short (DRYS) calls; Jon Najarian owns (GS) call spreads; Jon Najarian owns (GT), is short (GT) calls; Jon Najarian Owns (SNDK); Terranova owns (C), (VRTS), (UPL), (PEP), (NKE), (GS), (OXY)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (AAPL)
Accounts Managed By Kanundrum Capital Own (ANDE)
Accounts Managed By Kanundrum Capital Own (DE)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Own (FCX)
Accounts Managed By Kanundrum Capital Own (GLD)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (TBT)

For 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)

For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (C) for clients
Edwards owns (F) for clients
Edwards owns (GS) for clients
Edwards owns (GLD) for clients
Edwards owns (PCL) for clients
Edwards owns (SLV) for clients

For David Riedel
** No disclosures

For Dennis Gartman
Funds Managed by Dennis Gartman are long gold, short Euro

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