Pros: Is Something Bigger Happening in the Market?

Wednesday, 17 Oct 2012 | 5:28 PM ET

TheS&P 500 rose for the third consecutive day on Wednesday, much to the dismay of bears.

Not only does the 'fiscal cliff' reamin a very negative market catalyst but earnings expectations are terrible. Quarterly earnings are forecast to fall 3 percent from a year ago, according to Thomson Reuters data.

What gives? Why the rally?

Pros Hate Stock Market Rally
There are plenty of reasons for stocks to go down, but they don¿t. The Fast Money traders examine why the market continues to march higher and higher.

Top trader Brian Kelly, founder of Shelter Harbor Capital, says the positive sentiment in the market stems from a trio of factors.

- Potential EU Bailout: "We're hearing about a potential grand bargain in which Italy, Greece and Spain all get bailouts at once. That's bullish."

- Improved Housing Data: Groundbreaking on new U.S. homes surged in September to its fastest pace in more than four years, a sign the housing sector's budding recovery is gaining traction and supporting the wider economic recovery.

- Potential Rotation: With the yield on the 10-year hovering around 1.8%, pros expect a rotation out of bonds and into stocks as money managers chase yield.

And Kelly adds that technical are also bullish. "1425 has held as a level of support."

All told, he believes the rally has legs.

Although trader Guy Adami, managing director of stockMONSTER.com is bearish long-term, in the near-term he agrees with Kelly that the path of least resistance looks to be higher. "I expect the market will push toward 1525, " he says.

Jon Najarian, co-founder OptionMonster.com, is also looking for the rally to continue. "The Fed Chairman has effectively shoved people into the market – that's what's happening. That's what's behind the rally."

Posted by CNBC's Lee Brodie

Trader disclosure: On Oct. 17, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Karen Finerman is long AAPL; Karen Finerman is long AAPL PUT SPREADS; Karen Finerman is long BAC; Karen Finerman is long BAC CALL SPREADS; Karen Finerman is long JPM; Karen Finerman is long JPM CALL SPREADS; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long MSFT; Karen Finerman is long COMM; Karen Finerman is long RLGY ;Karen Finerman is long GOOG; Karen Finerman is short IWM; Karen Finerman is short MDY; Karen Finerman is short SPY; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Brian Kelly is long QQQ; Brian Kelly is long SMH; Brian Kelly is long FXP; Brian Kelly is short XLF; Brian Kelly is short EWA; Jon Najarian is long GS; Jon Najarian is long JPM; Jon Najarian is long FB; Jon Najarian is long MSG; Jon Najarian is long PHM; Jon Najarian is long DHI; Jon Najarian is long LEN; Jon Najarian is long BBBY.

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