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Top Traders: Are Stocks A Little Too Resilient?

Nearly everyone on Wall Street was chattering about how surprising resilient the market was on Friday in the wake of an extremely disappointing jobs report.

But was it too resilient?

With the S&P trading near its highs for the year the market may be in uncharted territory with the potential for both significant upside and sharp downside.

Bulls point to the technicals.

They say if the S&P can break above 1228, there’s a lot of room to go higher. Bears argue that stocks are already over extended with the next negative headline out of Europe poised to trigger a sharp sell-off.

How can you protect and profit in this precarious market.

Instant Insights with the Fast Money traders

I thought the S&P’s bounce higher on Friday was remarkable, says Guy Adami. The market had every reason to sell-off and it didn’t. But I remain focused on the 1225 level. I expect that could be critical resistance.

I’m most impressed by the decline in the Vix , says Tim Seymour. As Jon Najarian noted on Thursday it may be an endorsement that the rally has legs.

Weakness in the bond market tells me the market basically ignored the jobs numbers, adds Brian Kelly. It suggests that the Street may be inclined to shrug off bad news right now.

The jobs report is one piece of data in a very complicated mosaic, reminds Karen Finerman. The question becomes – is it a trend? I position for a sell-off over one data point.

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CHASE FOR PERFORMANCE

And on the Strategy Session Gary Kaminksy reiterated something he also talked about on Fast Money - that the chase for performance is driving the market.”The fear of relative under performance is the main factor motivating money managers,” Kaminksy says. “There aren’t many more days this year where there will be significant volume – days when they can try to catch up.”

In other words, he expects a chase for performance to trump most other catalysts for at least the next two weeks. And although there are 4 weeks of trading left - volume typically dries up close to the holidays making, "the 17th the last day where money managers can make a significant change to portfolio," he says.

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PROFIT & PROTECT: METALS

Looking at the sectors where you may need a protection plan, how should you trade metals with copper and gold both climbing more than 12% in the last 3 months.

Do you get out now?

I’d think about some stock replacement strategies in this space, says Brian Kelly. Considering the move in GDXJ ,I took profits and bought calls.

I’m long platinum and adding to my position, says Patty Edwards, but it’s a play on the global auto market.

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GLOBAL TRUCKING

Oil has underperformed all year, but this week it sprang back to life: up 6%. And a space that's tethered to the fate of crude is trucking. Karen said she liked the trade about a month ago.

Since then, the Dow Transports has led the Dow Industrials, a bullish sign according to Dow theorists.

Should you stay bullish, too?

I remain bullish, reveals Karen Finerman. Truck data out on Thursday was phenomenal, she says . The run rate for truck orders was gigantic. That’s great news for Cummins , Daimler and all the names in this space.

Also, you can play trucks with Goodyear Tire, adds Brian Kelly.


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PROTECT & PROFIT: RETAIL

Retail stocks have been among the top performers in 2010 with Black Friday results adding more fuel to the fire. With the XRT, the ETF that tracks specialty retailers up 35% year to date should you drop your shopping stocks now?

What’s the trade?

I think some of the retailers may have shown their hands, says Guy Adami. For example, I think the shorts have gotten squeezed out of Abecrombie. If you’ve enjoyed the ride higher it’s probably time to take profits.

I added to my position in Aeropostale, says Karen Finerman. I think it’s very attractively priced right now. And I’m watching TJX. I’m a buyer on a pullback.

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DOOMSDAY TRADE

The idea of hedging against catastrophe, otherwise known as tail risk, has become the latest rage among hedge funds, according to money managers and traders.

Three years after Nassim Nicholas Taleb popularized the idea of guarding against so-called black swan events—extremely rare but disastrous market circumstances—a small but growing number of hedge funds have opened dedicated tail-risk hedging vehicles to provide wary investors with additional insurance against calamity.

Learn more about this trend. Click here to go to "Hedge Funds Pile Into Doomsday Trade" or watch the video above for our conversation with Anthony Scaramucci on this topic.





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Trader disclosure: On December 3rd, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL), (BAC), (F), (VIP); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman owns (AAPL); Finerman’s firm owns (ARM); Finerman owns (BAC); Finerman’s firm owns (BKS); Finerman’s firm owns (CMI); Finerman & Finerman’s Firm owns (JPM); Finerman & Finerman’s Firm owns (MSFT); Finerman’s firm is short (IJR); Finerman’s firm is short (MDY); Finerman’s firm is short (SPY); Finerman’s firm is short (IWM); Finerman’s firm owns S&P 500 and Russell 2000 puts; Finerman's firm owns (ARO); Finerman's firm owns (TJX)

For Brian Kelly
Accounts Managed By Kanundrum Capital Own (AAPL)
Accounts Managed By Kanundrum Capital Own (GT)
Accounts Managed By Kanundrum Capital Own (JPM)
Accounts Managed By Kanundrum Capital Own (GDXJ) Calls
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (FCX)
Accounts Managed By Kanundrum Capital Own (ARMH)
Accounts Managed By Kanundrum Capital Own (RDC)
Accounts managed by Kanundrum Capital own (TBT)

For Patty Edwards
Edwards Owns (AAPL) For Clients
Edwards Owns (AMZN) For Clients
Edwards Owns (F) For Clients
Edwards Owns (GS) For Clients
Edwards Owns (MSFT) For Clients
Edwards Owns (TIF) For Clients
Edwards Owns (TTM) For Clients
Edwards Owns (XLK) For Clients

For Anthony Scaramucci
***No Disclosures***

For David Riedel
***No Disclosures***




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