Stocks Defy Gravity, Best Weekly Gains in 2 Months

On Friday the S&P 500 closed out its best week in over 2 months as the bulls defied chatter of a pullback and drove the market even higher.

For the week the Dow rose 2.3 percent while the S&P 500 rose 2.7 percent.

Signs of improvement in the economy and strong corporate earnings trumped fears that commodities had moved too far too fast.

Of all the sectors, technology was the greatest source of bullish momentum with buyers pushing the Nasdaq to new 3-year highs after the index posted its best week since mid-September.

However, investors were selective and took profits in energy, and financials.

What should you make of the moves How should you position now?

Instant Insights with the Fast Money traders

Guy Adami had been cautious but on Friday's Fast Money admits that the market performance has been outstanding and says, "You can't discount that." He thinks the market could continue higher because, "Not only do the bears want it to go down but the bulls want it to go down too, so they can buy more. And when both want something to happen, it typically doesn't."

Joe Terranova is impressed by the rotation happening in the market. "Late in the seesion we saw a rotation into laggards such as health care and consumer stocks," he explains. It suggests the market may be finding new leadership.

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YIELD SIGNS

Turning attention to the bond market, yields broke out to their highest levels in about 7 months after the jobs report showed the best increase in average hourly earnings in a year; investors took it as a sign of inflation.

What’s the trade?

I think these higher rates are good and consistent with a recovering economy, says Karen Finerman.

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CRAZY WEEK FOR CRUDE

Crude sold off Friday after a volatile week on speculation that the crisis in Egypt had reached a tipping point.

"The market is moving on rumors that Mubarak may fly the coop. If he leaves it may alleviate tensions," says Phil FLynn, analyst at PFGBest Research in a Reuters interview.

What’s the trade?

The charts suggest to me oil is overextended, says Guy Adami, I think crude trades down to about $85.

I thought the price action in energy equities was lousy on Friday, says Joe Terranova. I pared back my position, though I still believe for the long-turn, the trade is long or flat.

I’m seeing a lot of options activity in the oil services names, says Pete Najarian. But right now, you’ve got to be nimble in this space.

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FAST FLASH: SMH HITS NEW 52 WEEK HIGHS

The traders are also closely watching the action in semis after the SMH hit a fresh 52 week high on Friday with Broadcom and Nvidia two of the biggest winners of the day.

What's the trade?

The SMH may have more upside because Intel is a big part of this ETF and it hasn’t participated in recent gains, says Pete Najarian. It could play catchup.

In this space, I think Nvidia has more room on the upside and I’d also take a look at Qualcomm, says Guy Adami. Also I’m interested in JDSU on a pullback.

I’d put Infinera and Finisar , on the radar, says Stephen Weiss.

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