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Halftime: Did Goldman Sachs Just Save The Bulls?

Two of the year’s biggest winning sectors again landed in the spotlight with investors turning optimistic that both sectors had room to run.

As you may know energy and materials had been top performers this year pushing the S&P to a bull market high earlier in 2011, before paring some gains.

However, during recent weeks investors began to question whether the commodities bull had run out of stamina, especially after new data called global growth into question. For example, China’s PMI just hit a 10-month low.”It’s no secret that commodities have led the recent decline in the market,” reminds CNBC’s Scott Wapner.

But then, on Tuesday Goldman Sachs practically re-ignited the bull single-handedly. The firm raised its price forecasts on a slew of commodities including crude oil and industrial metals and they reiterated their positive view on gold.

“We now believe that the risk/ reward once again favors being long commodities," says Goldman analysts. "We are shifting back to a near-to medium-term overweight recommendation.”

On the news shares of the XLE shot higher. Does that mean risk is back on the table? Did Goldman just save the rally?

Instant Insights with the Fast Money traders

Trader Joe Terranova does think its time to put risk trades back on. “Are we in the process of a meltdown? I don’t think so,” he says. Terranova considers the recent pullback 'normal' and expects stocks to continue their march higher. "It's a pause that refreshes," he says.

In fact, Terranova feels the time to rotate out of some of your more defensive positions such as health care is now. ”I’d own integrated names as a second half story,” he says.

Trade Brian Kelly thinks the recent sell-off in energy and materials may have been an overreaction to some of the news headlines. He reminds the desk that although China PMI slipped to a 10-month low, “we’re still looking at 8% GDP. If we grew like that in this country we’d be ecstatic. Put it in perspective,” he says.

Kelly also sees other reasons to remain bullish. He thinks China will generate more demand for diesel fuel because of reported electricity rationing. (Smaller generators are fueled by diesel.) He suggests gaming it with a long position in refiners such as Valero or Holly Corp. However, it's worth noting Kelly is making his bets with calls to limit his risk.

Trader Patty Edwards is more on the fence. Edwards shares Terranova’s enthusiasm for the large integrated names, however she also suggests watching the action in WTI as a ‘tell.’ Following Goldman’s bullish note, “It’s not talking off the way I would have expected,” she says.

Trader Zach Karabell reminds the desk that the commodities trade could be facing headwinds in the form of a stronger dollar. Concerning the financial woes vexing Europe, “Over the next 3 to 4 weeks, I expect more dollar strength,” he says. “That plays into the commodities story.” And he adds, if you're trading with a short term time horizon, it's probably smart to form your thesis about metals separately from energy.

What do you think? We want to know!

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IPO FEVER
Call it a case of IPO fever, the Google of Russia Yandex priced this week, Linkedin priced last week, and a massive AIG secondary comes after the bell.

Should you get involved?

Trader Patty Edwards thinks all the stock are interesting in the long-term but she adds that right now, “I wouldn’t get involved in all the hype.”

Trader Zach Karabell also doesn’t see a big reason to jump in right now. “Buying a hot IPO is often a recipe for watching your money disappear,” he adds.

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TAKE YOUR POSITION: COSCTO

The traders are keeping a close eye on Costco , with the company scheduled to report earnings on Wednesday before the bell.

How should you play it?

Patty Edwards feels the stock is already priced for perfection. “Love the company but not the stock,” she says.

Joe Terranova adds that on a pullback, “I’d take a look.”

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VOLCANO – THE SEQUEL?

A volcanic eruption in Iceland over the weekend sent a plume of volcanic ash more than 3 miles high drifting over Ireland, Scotland and Norway. As a result, more than 250 flights have already been grounded.

Will this disaster be as devastating to the airline industry as last year's eruption?

Find out from James Higgins, Soleil Securities analyst. Watch the video now!






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Trader disclosure: On May 24, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova owns (XOM), (KSS), (CVI), (OXY), (TM), (BJ), (DIS), (PFE), (V), (HPQ), (FLX), (JPM), (MCD), (PEP) and (VRTS). Joe Terranova is short (DELL). Zachary Karabell owns (AAPL) and (GOOG).

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 (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 (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 (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 (XLF)
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 DOMINO'S PIZZA UK & URL PLC
Virtus Investment Partners Owns More Than 1% Of (DRYS)

Zachary Karabell
River Twice Capital is short (SHLD)
River Twice Capital is short (GS)
River Twice Capital is short SPY, QQQ

Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AMZN) For clients
Edwards owns (GLD) For clients
Edwards owns (MSFT) for clients
Edwards owns (AZO) For clients
Edwards owns S&P 500 For Clients
Edwards owns (QQQ) for Clients
Edwards owns (SLV), (PGM) for Clients

James Higgins
**No Disclosures

Brian Kelly
Accounts Managed By Brian Kelly Capital are long (ANDE)
Accounts Managed by Brian Kelly Capital are long (MCP) calls
Accounts Managed By Brian Kelly Capital are long (TLT) Calls
Accounts Managed By Brian Kelly Capital are long Australian Dollars
Accounts Managed by Brian Kelly Capital are long (HOC) calls
Accounts Managed by Brian Kelly Capital are long yen



CNBC.com with wires.

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