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Pro Traders: Market Has Every Reason To Melt-Up

Tuesday, 21 Dec 2010 | 6:04 PM ET

To the chagrin of all those Scrooges, Grinches and bears out there it appears that Wall Street may have a very merry Christmas after all.

The S&P closed higher Tuesday after solid earnings and a flurry of merger activity underpinned a steady upward trend that reinforced investor optimism for the coming year.

"We've been putting risk at work for some period of time and we think people will continue to regret holding too much cash and being too conservatively positioned," says Bob Browne, chief investment officer at Northern Trust in a Reuters interview.

Northern Trust, which has $657 billion in assets under management, recently reduced its cash allocation and increased investments in U.S. large cap equities and fixed income.

"If you take a balanced view of the positives and the negatives short term and long run, we think it gets you to an overweight position in equities," Browne adds.

Looking at the technicals, the story is every bit as positive - the S&P 500's close is on the cusp of closing levels not seen since before Lehman Brothers collapsed in September 2008, an important psychological barrier for investors at 1,255.08.

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

Barring any major bombshells, the Fast Money traders expect the melt-up will continue into year's end.

Guy Adami doesn't think 'mister market' gives investors this much opportunity to sell the highs. In other words if stocks had topped out and were now going to sell-off sharply, they would have sold-off already. He says, "I’m now watching 1280 as the next key technical level - and potential point of resistance."

Tim Seymour agrees that the market 'goes all the way' into year’s end. He says, "There’s very little to stand in the way of people putting money to work. The fear among money managers right now is to not put money to work."

Brian Kelly thinks by shrugging off bad news from Europe the market reinforced its uptrend. "We had concerns in the morning that Portugal was going to be downgraded and there were issues concerning France, but the market went higher."

"In light volume it’s easy to melt-up," adds Karen Finerman, "but it’s also easy to sell-off." In other words, as a value investor she doesn't suggest trading in and around the potential of a melt-up. Instead she says ask yourself where you think the economy is going over the next 12 months, and then position accordingly.

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BACK TO BUSINESS FOR BANKS

Is it back to business for the banks? JPMorgan led financials higher Tuesday after the bank said it had boosted small business lending by over 40 percent this year.

What’s the bank trade?

Clearly I think it’s a positive but I think the market may have overreacted to the upside, says Karen Finerman. Long-term I still like this name and expect to see further rotation into big cap financials.

In this space Raymond James is a name that I continue to like and a name that few people talk about, adds Guy Adami.

I’m watching some bullish options action in the financials, says Pete Najarian. A larger than usual volume of Jan 26 calls in the KRE and Mar 17 calls in the XLF suggests to me that some investors expect to see a sharp move higher.

I’m still short BofA , reminds Steve Cortes, but right now the trade isn’t working. Although I’m a fan of the brokers I’m not a fan of money center banks; I think they’re still hobbled by lingering mortgage issues.

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BREAKING NEWS: MICROSOFT

In breaking news, CNBC’s John Fortt tells the Fast traders that Microsoft is said to be unveiling a version of its Windows operating system that runs on ARM processors at CES next month.

According to Bloomberg, this version of Windows will continue to work on x86 processors, and that it should improve battery performance on devices like tablets.

Microsoft already has a version of Windows called CE that runs on ARM, however it's been designed for embedded systems. This version can is also able to run on x86, Hitachi SuperH, and MIPS. Additionally, there's a version called Windows Embedded Compact 7 that's been built for tablets and other small form factor devices, however this does not quite match up feature to feature with a full-fledged version of the desktop OS.

This would be a nightmare for Intel, says CNBC’s John Fortt. It should intensify the battle between Intel and ARM.

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GOLDMAN’S ASSET CHIEF: 2011 YEAR OF THE USA

Will 2011 be the year of the U.S.A? Goldman Sach's Jim O’Neill seems to think so, calling for a 20 percent jump in the stock market next year due to a stronger than expected US economy.

However Miller Tabak strategist Peter Boockvar has some problems with that call. He says a better economy doesn’t necessarily equate to a higher stock market. Get all the details. Watch the video above.




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Trader disclosure: On December 21st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL), (BAC), (F), (FXI); Adami owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Adami's wife works at (MRK); 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 S&P puts; Finerman's firm is long Russell 2000 puts; Finerman owns (AAPL); Finerman owns (BAC); Finerman owns (CVS); Finerman's firm owns (CVS); Finerman owns (GOOG); Finerman's firm owns (JPM) and (JPM) leaps; Finerman owns (JPM); Finerman owns (MSFT); Finerman's firm owns (MSFT); Finerman's firm owns (WBC); Pete Najarian owns (KRE) calls; Pete Najarian owns (YHOO); Pete Najarian owns (MSFT) call spreads; Pete Najarian owns (AKAM) call spreads; Pete Najarian owns (V) call spreads; Pete Najarian owns (WLT) call spreads; Pete Najarian owns (C); Pete Najarian owns (MS); Pete Najarian owns (NKE) call spreads; Pete Najarian owns (GE); Pete Najarian owns (F); Pete Najarian owns (BBY) calls; Pete Najarian owns (SMH) call spreads; Pete Najarian owns (M) call spreads; Pete Najarian owns (HK) calls; Pete Najarian owns (MRO); Pete Najarian owns (CNI)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (BBT)
Accounts Managed By Kanundrum Capital Own (FCX)
Accounts Managed By Kanundrum Capital Own (GLD)
Accounts Managed By Kanundrum Capital Own (JPM)
Accounts Managed By Kanundrum Capital Own (MCP)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (WFC)
Accounts Managed By Kanundrum Capital Own (CLP)
Accounts Managed By Kanundrum Capital Own (IPI)
Accounts Managed By Kanundrum Capital Own (LYC.AU)
Accounts Managed By Kanundrum Capital Own (MON)
Accounts Managed By Kanundrum Capital Own (XLE)
Accounts Managed By Kanundrum Capital Own (OIH)
Accounts Managed By Kanundrum Capital Own USD
Accounts Managed By Kanundrum Capital Are Short The Euro
Accounts Managed By Kanundrum Capital Are Short The Yen

For Peter Boockvar
Peter Boockvar is long EWJ
Peter Boockvar is long crude
Peter Boockvar is long gold and (GLD)
Peter Boockvar is long (SLV)
Peter Boockvar is long (DBA)

For Carter Worth
No disclosures.

For Andy Busch
Busch has no disclosures.

For Ben Schachter SOT
Schachter has no disclosures.

For Scott Nations
Nations does not own (DE), but a member of his family does (mother).

GE is the parent company of CNBC
NBC Universal is the parent company of CNBC

CNBC.com and wires

  Price   Change %Change
S&P 500
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BAC
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JPM MLP ETN
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KRE
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MSFT
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RJF
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SPDR FIN SEL
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