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Pros: Is Something Bigger Happening in the Market?

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?

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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