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Stocks Stall Ahead Of Earnings

The S&P 500 eked out its 6th consecutive day of gains on Monday to end at its closing high for the year as energy shares rose alongside the price of oil.

However the market clearly lost some strength in the afternoon as the Dow and Nasdaq pared gains with investors opting to lock in profits before earnings season picks up steam. Volatility was heightened by light volume, with many market players away for the Columbus Day holiday.

With profits over the last two quarters characterized by cost cutting and layoffs, investors are now keen to see if companies can generate returns from stronger sales.

What should you know?

It was light volume on Monday, echoes Joe Terranova. That’s important to note. And it seems there are a lot of techincals to watch this week, he adds. I want to see the S&P futures on Friday settle above 1075. And I want to see the Dow settle above 10,000. We need Friday confirmation.

Forget 10,000. Greg Troccoli of Opalesque tells Fast Money that as a technician he’s looking at 9918 as key level on the Dow. If we can close above 9918 for the week then we are set to go 300+ points higher; Troccoli says.

With a slew of bank earnings coming this week, I'm closely watching the financials, reveals Karen Finerman. I think JPMorgan’s earnings on Wednesday are going to be market moving.

If you’re looking for a trade, I’d look at Alcoa, adds Guy Adami. I’d take a shot on the short side.

That’s a tough trade, counters Joe Terranova. We may see money managers step into this market chasing returns.

I agree with Joe, concurs Tim Seymour. I would be afraid to be short here.

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DOLLAR SLIDE LIFTS COMMODITIES

Oil jumped 2 percent on Monday as cold weather swept across the United States leading investors to speculate more of the fuel will be needed this winter.

"Stunning records for cold were set across the nation, increasing the demand for heating fuels over the weekend," says Phil Flynn, analyst for PFGBest Research in Chicago.

Further support came from a fall in the U.S. dollar which continued its long term trend lower. The weaker dollar also pushed precious metals higher with gold closing near $1,060.

What’s the trade?

In this space, I think the opportunity is long crude oil, muses Joe Terranova. It seems to me that oil has been consolidating since August and is now ready to break out above $75.

I agree with Joe, echoes Tim Seymour. It seems to me investors are moving out of the dollar and into other areas. That should generate further dollar weakness and continue to support the rally in oil. That doesn't mean the dollar couldn't snap back short-term; but in the long-term I expect it to go lower.

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CHART OF THE DAY: TRANSPORTS CHURNING HIGHER

The Dow Transports closed in positive territory ahead of CSX earnings on Tuesday. Can this sector drive the market?

What’s the trade?

The transports are certainly tied to economic activity but its only one piece of the puzzle, says Karen Finerman. However I see a lot of positive pieces coming together and as a whole, they make me optimistic about recovery.

I’m watching BNI , says Guy Adami, $81 seems to be resistance.

FedEx is a fantastic company and it’s never been better run, says Tim Seymour. However I’m not so sure that shipping is going to explode higher anytime soon.

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TOPPING THE TAPE: POWER SANDERS & DRILLBITS

Black & Decker led consumer names higher on Monday after power tools maker raised its third-quarter earnings outlook ahead of series of blue chip earnings reports this week.

What’s the trade?

I was surprised that Home Depot and Lowe’s didn’t trade better on the Black & Decker news, muses Karen Finerman.

If you’re looking for a trade in this space I’d look at Home Depot too, adds Guy Adami.






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Trader disclosure: On October 12, 2009, 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), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Seymour Owns (AAPL), (BAC), (F), (MGM), (MSFT), (BX), (POT); Seymour Owns Shares Of Gazprom; Finerman's Firm Owns (BAC), (BAC) Calls, (BAC) Call Spreads, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (CSCO), (MSFT), (TGT), (WMT), (YUM), (PLCE); Finerman's Firm Owns (WLP) Calls; Finerman's Firm Owns (UNH) Calls; Finerman's Firm Is Short (IJR), (MDY), (IWM), (UNG), (USO); Finerman's Firm And Finerman Own (WFC) Preferred; Terranova Owns (JPM), (NOV); Terranova Is Short (GRMN); Terranova Is Short (CCL); Terranova Owns Dec. 2009 Gold Futures; Terranova Owns Dec. 2009 Crude Oil Futures; Terranova Owns Dec. 2010 Crude Oil Futures; Terranova Works For (VRTS)

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