S&P Gains Just Beginning or Only Window Dressing?

Shock and awe is about the only way to describe the Street's reaction to the stock market on Thursday.

All 10 S&P sectors finished in positive territory with stocks on track to put in their best week in about a year.

Tailwinds were so strong that the S&P 500 closed above its 50-day moving average of 1,317 – flying in the face of analyst expectations that it would run into resistance at that lofty level.

Now traders are trying to determine if the rally has long legs, just a little more power, or if it was mostly window dressing with the next move lower.

How should you position now?

Instant Insights from the Fast Money traders

Although the Fast Money traders concede that part of the gains were likely fueled by window dressing, they also think other powerful catalyst triggered the gains. And they expect those catalysts to remain powerful drivers – even after the end of month.

Option Monster Jon Najarian points to the VIXM, which “shows investors are not scrambling to cover.” In other words, Najarian thinks money managers are growing more optimistic, which suggests the S&P has more upside.

Trader Brian Kelly thinks the market should continue to rally simply because “gas prices are down significantly from their highs and Japan industrial production has rebounded.” In other words two of the biggest drags on stocks have dissipated.

Joe Terranova adds that rotation should drive the S&P. He expects to see money come out of Treasurys and into stocks. “As we enter the new quarter portfolio managers are on the edge of their seats,” he says, because they’re under-invested in equities.

Only trader Guy Adami is cautious – and only somewhat, at that. “If you’ve missed the rally I’d be hard pressed to go piling in on Friday,” he says. “I think the market sells off to 1300, but if/when that happens I'd take another look.”

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Trader disclosure: On June 30, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova Owns (VRTS); Terranova Owns (IBM); Terranova Owns (FCX); Terranova Owns (CVI); Terranova Owns (F); Terranova Owns (AAPL); Terranova Owns (CAT); Terranova Owns (BX); Terranova Owns (HPQ); Terranova Owns (MA); Terranova Owns (PEP); Terranova Owns (MCD); Terranova Owns (JWN); Terranova Owns (TM); Terranova Owns (LULU); Terranova Owns (WFM); Terranova Owns (DAR); Terranova Owns (BJ); Terranova Owns (XOM); Terranova Is Short (DELL); Jon Najarian owns (AAPL) call spreads; Jon Najarian owns (AXP) call spreads; Jon Najarian owns (AKS) call spreads; Jon Najarian owns (BIDU) call spreads; Jon Najarian owns (MT) call spreads; Jon Najarian owns (BIDU) call spreads; Jon Najarian owns (HOC) call spreads; Jon Najarian owns (NSC) call spreads; Jon Najarian owns (PTEN) call spreads; Jon Najarian owns (UA) call spreads; Iuorio is long calls in (TM); Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Adami owns (INTC)

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