Pros Debate: Does This Rally Continue?
U.S. stocks rallied Thursday after European Union leaders agreed on a plan to fix the region’s sovereign debt crisis and U.S. gross domestic product rose at a 2.5 percent annual rate in the third quarter, its fastest pace in a year.
All major average indexes are now in positive territory for the year, but the question remains—does this rally continue?
So long as the S&P 500 index can close above the 1,230 level, trader Guy Adami thinks the markets will push higher. Looking at the 200-day moving average, Adami said the 1,275 level has been the key level of resistance level on the upside. He isn’t concerned about that, though, because the technicals are the best he’s seen in quite some time.
Given the agreement by European policymakers and positive U.S. GDP data, options trader Jon Najarian said "there's just a lot of momentum on the bulls' side."
"Clearly, there's a lot of shorts that are caught," said Najarian, co-founder of optionMONSTER.com. "Every rally begins with a short-covering and that is the case today. There is clearly a lot of folks who have faded this."
All rallies start with short-covering, Stuart Frankel's Steve Grasso added from the floor of the New York Stock Exchange. So long as the S&P holds the 1,257 level, he thinks the markets will continue to climb. The rally needs to hold for a few more days before he thinks people can get too bullish.
Trader Steve Cortes isn't bullish at all. For weeks, Cortes has remained negative on the markets. Despite Thursday's gains, Cortes said he's still not a believer in the rally.
"There's nothing wrong with being wrong and flat, and I am flat here," Cortes said, adding he does not have short positions. "I was hoping we would get this resolution and this kind of bounce and I thought the market would react this way because I think now is the time to put out shorts."
With the S&P 200 points off its October lows, the Veracruz founder said now isn't the time to get excited. Instead, he would put on shorts.
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Trader disclosure: On Oct 27, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns AGU; Adami Owns C; Adami Owns GS; Adami Owns INTC; Adami Owns MSFT; Adami Owns NUE; Adami Owns BTU; Weiss owns VZ; Weiss owns F; Weiss owns NIHD; Weiss owns AKAM; Weiss owns JEC; Weiss owns WLP; Weiss owns COP; Weiss owns MDRX; Weiss owns RIMM; Weiss owns HPQ; Weiss owns WLT; Weiss owns AGU; Najarian is long CIGX; Najarian is long CBOE; Najarian is long CME; Najarian is long DB; Najarian is long CS; Najarian is long UBS; Grasso owns AA; Grasso owns AKS; Grasso owns ASTM; Grasso owns BA; Grasso owns BAC; Grasso owns D; Grasso owns KEG; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns S; Grasso owns XLU
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Najarian has long call spreads in MSFT
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