Halftime: S&P Action Turning Bears into Bulls?
This market seems to want to keep going up, despite a string of negative headlines.
Even with Libya, Japan, Europe and disappointing durables the Teflon Dow marched higher on Thursday coming within 200 points of a 2011 high.
And the action in the S&P was equally impressive.
Chart watchers point out that the S&P 500 broke above its 50-day moving average at 1,305. Some investors take that as a signal the market has gotten past the worst of its recent pullback.
Is the S&P action turning bears into bulls?
Instant Insights with the Fast Money traders
Guy Adami admits that he’s been bearish and in the short-term he's changing his outlook. Although he had expected the market to breakdown he also says, “you have to allow the tape to tell you what’s happening and the tape is saying the S&P wants to go back to 1325.”
It's worth noting that rather than climbing on fundamentals, Adami suggests that recent gains were triggered by short covering. “This last 25 points in the S&P caught a lot of people off guard and I’m one of them” he says. “And now we’re getting a lot of covering.”
Trader Steve Grasso cautions investors not to "get myopic on 1305," the 50-day moving average. "1308 is more important,” he says. “That’s the level I’d want the S&P to close above to feel bullish.
However, if you’re among that group of investors who doesn’t think the S&P can run without financials then the market may be challenged. Financials have lagged the S&P and over the past 30 days they’ve been the worst performing sector.
”I think there are still some things out there in financials that have to scare you a little bit,” says Guy Adami.
In fact, Wells Fargo removed BofA from its priority stock list while FBR Capital downgraded it to "Market Perform" from "Outperform". The downgrades come just days after the Fed blocked a BofA plan to increase its dividend.
Brian Kelly finds these developments bearish. “I’m short the XLF,” he says. “Considering how steep the yield curve is, if BofA can’t earn enough money to raise their dividend now, in what environment will they be able to do it?"
Adding to the sector headwinds widely followed analyst Meredith Whitney cut estimates on Morgan Stanley, reminds host Melissa Lee.
”I’ve worked with Meredith Whitney and she does her homework,” says Guy Adami. “When she makes calls I listen to them.”
MICRON, RED HAT EARLY PREDICTORS OF TECH’S FIRST QUARTER?
On Thursday the Fast Money traders were taking a closer look at two tech growth names, Micron and Red Hat.
Micron popped after the company posted results well above expectations due to aggressive sales growth. And Red Hat wowed the Street after the company topped estimates due to an accelerating shift to cloud computing.
What should you make of it?
Guy Adami thinks Micron "has room to run north of 12. "And Red Hat is another stock I like," he says. But he adds that tech is often a case of the haves vs have-nots. "Cisco trades like grim death," he says.
Steve Grasso reveals that he sold Micron into Thursday's strength. "Every time the stock gaps up, the stock has a history of failing," he says.
Brian Kelly recommends looking at Teradyne. "I’d nibble on the pullback," he says.
UNUSUAL ACTIVITY: NVIDIA
Elsewhere in tech, Jared Levy has spotted unusual activity in Nvidia .
He's seeing a lot of 19 and 20 call buying in the front month which suggests the stock could go higher. However, he cautions that historically 20 and 22 have been resistance.
POLL OF THE DAY
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CNBC.com with wires.