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HALFTIME REPORT: The Market's Resilient Rally... How To Play It


The markets are marginally higher during intraday trading, despite a jump in jobless claims, a dip in retail sales and a new report showing a 7% increase in foreclosures.

There was also good news in the markets, with Ford announcing that it will be increasing production on the heels of the government's "Cash for Clunkers" program and the breaking news that Hedge fund titan John Paulson had bought a major stake inBank of America . Both the Dow and S&P 500 were up slightly during the halfway point of the trading day Thursday.

Word On The Street

There are numerous concerns surrounding the consumer - from sales numbers to foreclosures - and it seems pretty amazing that the markets are up across the board today. "It makes no sense to me whatsoever," says Patricia Edwards of Storehouse Partners, who is baffled that there can be such a wealth of bad news but the markets can still be in positive territory. She predicts that especially for retailers, the earnings seen in the coming weeks will be all about cost cutting, as she points out that there is no strong demand for consumer goods right now. 

Fast Money Halftime Report

President & Portfolio manager at Profit Investment, Eugene Profit, sees the upwards action as short covering from investors who are jumping into the rally last-minute. He sees this as last minute moves because the economic data simply cannot support this rally.

But what are the options telling us on this point? In the retail sector, options activity was looking good for Walmart as much as 1 month ago, and the stock has performed "admirably" says Jon Najarian of OptionMonster.com. Although he encourages sticking with the Walmart trade, he's nervous about other retail stocks like Abercrombie & Fitch , a company that announces earnings on Friday that has some technicals on the bearish end of the spectrum. Najarian also notes that he sees put options activity to indicate other investors are nervous as well.

Market as Key Resistance Levels

In the Chart of the Day, Greg Troccoli is looking at key levels on the S&P 500 . "We are really in the trenches," he says, noting that the S&P September chart has been around 1000 for the past 10 trading days. "Although we can call this resilient, it is also stalling a little bit, and the moving average is a little steep. It wouldn't surprise me if we had a 20-30 point correction to the downside" he speculates, suggesting that this sort of move would be healthy for the markets.

Financials Leading The Way

The top performing sector of the day is financials, which had a rough start to the week but have climbed higher over the past two trading sessions. Bank of America shares have enjoyed a bump after it was revealed in an SEC filing that hedge fund manager John Paulson bought a major stake in it and other financial companies, including Regions Financial and Capital One . Should you invest alongside these big hedge fund managers?

"I wouldn't invest here," opines Eugene Profit, who points out that investors have no way of knowing at what price Paulson bought the stock, which could have been when the company was in single-digit territory, noting that it might take you as much as two years to see a profit like Paulson may have made. "You've had a run in some pretty weak names," he says, "and at the current price point, I think it's at a position where I would look to take profits and employ assets someplace else."

With poor foreclosure data lagging behind unemployment, Patricia Edwards reminds that banks may have significant headwinds moving forward.

For more insight into the financial sector, Bank of America and where new money is headed into the sector from market insider Steve Grasso, check out the video!Cheat sheet: Grasso sees the "whole sector being bought."

Mixed Bag for Retailers

With the government reporting that sales fell unexpectedly in July and although Walmart beat expectations and raised its profit outlook for the year, same-store sales missed, which concerned investors. What happened to Walmart here?

"You gotta look under the numbers a little here," says Patricia Edwards, "Part of the reason same-store sales were down was because of grocery deflation and currency fluctuation on the international side of things." Although she sees a potential pullback in share price, she considers Walmart  "the" retailer over the next 5 years. "It's an investment, not a trade," she says.

Trade To Go: JCPenney

Retailer JCPenney is set to report ahead of the bell Friday, what's the trade? Patricia Edwards likes the middle income space and thinks the company in particular has been doing a "fabulous job." However, she notes that Kohls, a company which Edwards thinks has better inventory and also inhabits the same space, offered some downward guidance today. On this news, she thinks you can stay away from JCPenney ahead of their numbers. "There's no rush to get in," she says. If you're going to go in anywhere, she likes Walmart .

Call The Close:

The Fast Money traders go around the horn, are they buying or selling into today's close?

Greg Troccoli: I'm selling... I hope I don't look like a crash dummy!
Eugene Profit: I've been selling into the close for the past few days, I think it will continue.
Patricia Edwards: I've been short and I'm staying short.
Jon Najarian: I'm keeping my eyes on ANF and Palm .

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CNBC.com with wires