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S&P Gains 'Sheer Lunacy', Says Pro Trader

Buyers took a deep breath and dove headfirst into the market on Monday driving the S&P sharply higher and the Dow above the psychologically important 12,000 level.

The bulls found traction early in the session, after a U.S. Nuclear Regulatory Commission official said the nuclear crisis in Japan was "on the verge of stabilizing.” The commentary quelled investors’ worst nightmares for Japan.

Adding to the optimism, billionaire investor Warren Buffett suggested that Japan was currently oversold and compared the quake to other extraordinary events that historically have been buying opportunities.

And on another bullish note AT&T said it would buy wireless rival T-Mobile, sparking expectations of more deal activity.

Are Monday's gains a sign that the market wants to break higher? How should you position now?

Instant Insights with the Fast Money traders

Brian Kelly is skeptical of the rally. He calls Monday's gains "sheer lunacy." He reminds that the global economy has seen a series of shocks on both the supply and demand side.

"To think that everything is going back to normal and no companies are going to get hit and that yield curves are going to stay where they are; that seems crazy," he says.

Guy Adami shares Kelly’s outlook. His bias it toward the downside. “I think the market fails at these (pre-quake) levels,” he says. "I think we fail here and sift down on Tuesday," he says.

Steve Cortes is also skeptical. He feels if Japan was going to recover quickly copper would be performing much better. "Copper is putting in a series of lower lows and lower highs," he says. That's a bearish chart pattern.

Although a correction may be coming, top ranked technical analyst Jeff DeGraaf doesn't think it will be anything more severe than a shake-out, largely because the credit market remains relatively strong.

"Most of the time when there’s a correction in the equities market without a corresponding shakeout in the credit market it’s not anything worse than that -- a correction.”

However that’s not to say DeGraaf thinks the market is without headwinds. He doesn't. He also tells the traders that he does not see a “the foundation for a meaningful durable move higher.”

Click here for the entire technical analysis from DeGraaf.
Tim Seymour is on the other side of the trade. He thinks Monday's gains are a sign that the Street is digesting the tragedy in Japan. Although he's concerned about corporate profits during the next earnings season, “at 13 times the S&P looks a little cheap,” he says.

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MEGA-MERGER

As we mentioned above, wireless stocks landed in the spotlight on Monday after AT&T inked a $39 billion deal to acquire T-Mobile.

If their acquisition of T-Mobile passes regulatory scrutiny, AT&T will become the largest US wireless carrier.

According to Tolaga Research, when the deal closes AT&T's U.S. market share will increase to about 43 percent from 32 percent, putting it well ahead of Verizon Wireless's current 34.5 percent market share.

What’s the trade?

Steve Cortes isn’t so sure the deal will make it through. He’s a buyer of Sprint on the belief that stock was oversold on the news.

Stephen Weiss is on the other side of the trade; he thinks the deal leaves Sprint out in the cold. "It’s a two horse race now," he says. His trade is long Verizon .

Tim Seymour suggests putting TSU on the radar. He also likes MBT. “Both of these names could also be acquisition targets,” he says. And he also likes Vodafone .

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BUZZKILL: FINANCIALS

The traders were also closely watching the financials which lagged the market despite word on Friday that the Fed cleared the way for some banks to resume dividend payments.

On a related note, Citigroup announced a 1-for-10 reverse stock split, effective May 9. As with all reverse splits, the bank’s action increases the price of its shares, but decreases the number of shares outstanding.

What’s the trade?

Tim Seymour is bullish on Citigroup. But not because of the reverse stock split. He likes it for EM exposure.

Steve Cortes is on the other side of the trade. He’s shorting Citi because of its EM exposure.

Brian Kelly is bearish on banks broadly but largely because the yield curve is getting flatter, and the Treasury announced plans to sell mortgage backed securities. He suggests short position in both the XLF as well as the IXG , as a short play on global banks.

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ANALYZE THIS: U.S. TO BUILD NEW NUCLEAR PLANTS?

The U.S. is weighing a 90-day safety review of our 104 nuclear reactors in response to Japan's crisis at Fukushima.

So what is the future of nuclear power here at home?

Find out from BMO Capital markets analyst Michael Worms.

Watch the video now!






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Trader disclosure: On March 21, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is long (AGU); Guy Adami is long (C); Guy Adami is long (GS); Guy Adami is long (MSFT); Guy Adami is long (NUE); Guy Adami is long (INTC); Guy Adami is long (BTU); Steve Cortes is long (TM); Steve Cortes is long (GS); Steve Cortes is long (CSX); Steve Cortes is long (SDY); Steve Cortes is long (SO); Steve Cortes is long (S); Steve Cortes is long Crude Oil; Steve Cortes is short (F); Steve Cortes is short (C); Steve Cortes is short (UNP); Steve Cortes is short (SPY); Steve Cortes is short (DBA); Steve Cortes is short Wheat; Steve Cortes is short Soybeans; Steve Cortes is short AUD/USD; Steve Cortes is short CAD/USD; Steve Cortes is short EUR/USD; Tim Seymour is long (T); Tim Seymour is long (CCJ); Tim Seymour's firm is long (POT); Stephen Weiss is long (MSFT); Stephen Weiss is long (VZ); Stephen Weiss is long (QCOM); Stephen Weiss is long (CF); Stephen Weiss is long (JPM); Stephen Weiss is long (FAS); Stephen Weiss is long (HBAN); Stephen Weiss is long (HPQ); Stephen Weiss is long (MEE); Stephen Weiss is long (CNX); Stephen Weiss is long (DVN); Stephen Weiss is long (COP); Stephen Weiss is long (HK)

For Brian Kelly
Accounts managed by Kanundrum Capital Are Long (GLD)
Accounts managed by Kanundrum Capital Are Long (SLV)
Accounts managed by Kanundrum Capital Are Long (TLT)
Accounts managed by Kanundrum Capital Are Long (DBA)
Accounts managed by Kanundrum Capital Are Long Gold
Accounts managed by Kanundrum Capital Are Long Silver
Accounts managed by Kanundrum Capital Are Long U.S. Bonds
Accounts managed by Kanundrum Capital Are Short (XLF)
Accounts managed by Kanundrum Capital Are Short Copper
Accounts managed by Kanundrum Capital Are Short (IXG)
Accounts managed by Kanundrum Capital Are Short (LOW)
Accounts managed by Kanundrum Capital Are Short (FCX)

For Mike Khouw
Cantor Fitzgerald & Co. Is A Market Maker In (S)

For Michael Worms
No Disclosures

For Jeff DeGraaf
No Disclosures

For William Power
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