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Market Pros: Headwinds About To Topple Bulls?

Make sure to grab a coat if you're on Wall Street, headwinds are starting to gust again in the form of a higher dollar and higher rates in the bond market.

Lately advances in the dollar have been bearish for stocks, with dollar highs in the session corresponding to session lows in the S&P.

Also, a sustained rise in Treasury yields has sparked worry about rising borrowing costs; in turn banks which are heavily dependent on loan demand faded late day.

The sense among investors is that the market, after rising almost 11 percent so far in 2010, has run its course for the year.

"There are signs that the market is making a top at these levels, and people are starting to take profits," says King Lip, chief investment officer at Baker Avenue Asset Management in a Reuters interview.

How should you position now? What should you be watching?

Instant Insights with the Fast Money traders

If you’re looking for a reason to worry, Fast Money host Melissa Lee says the latest research from Bespoke, should do the trick. "When the S&P 500 and the 10 year yield both hit 6 month highs, stocks lose - on average - over the following 1 week, 1 month, 3 months and 6 months."

Karen Finerman remains cautiously optimistic. “I admit I’m a little concerned to see rates moving higher so quickly, she says. “But I still believe in the market story and I'm not a seller. I think the recovery is underway. I remain long and a buyer of puts in the SPY for protection.”

Tim Seymour thinks investors are mis-reading moves higher in the dollar and bond yields. “I take it as a sign the world is getting healthier,” he says. He doesn’t think investors should run for the exits.

Despite the close lower, Pete Najarian is impressed by the market action. "I thought the market held on as well," he says. "And the Vix held beneath 18, he adds. I don't see panic."

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BRUTAL 4TH QUARTER-ANALYSTS

There may be no holiday cheer for banks, with analysts slashing 4th quarter estimates for brokers - Nomura knocked both Goldman and Morgan Stanley -- while Goldman analysts took down EPS for Morgan.

What’s the trade?

Historically Goldman and Morgan have lumpy earnings, so I don't read that much into it, says Karen Finerman. I still like JPMorgan on expectations we see loan growth and credit quality improvement

Keep Morgan Stanley on your radar, says Pete Najarian. I think it could be a $30 stock. And I’d also keep the regionals on the radar.

Read more:

Click here for Hidden Weakness In The Financials?




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Trader disclosure: On December 15, 2010, 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), (GE); Pete Najarian owns (DD) calls; Pete Najarian owns (DRYS); Pete Najarian owns (YHOO); Pete Najarian owns (BBY) calls; Pete Najarian owns (C); Pete Najarian owns (F) bonds; Pete Najarian owns (GE); Pete Najarian owns (LOW) calls; Pete Najarian owns (MSFT) call spreads; Pete Najarian owns (MS); 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 is long S&P puts; Finerman's firm is long Russell 2000 puts; Finerman Owns (AAPL); Finerman Owns (BAC); Finerman Owns (GOOG); Finerman's firm owns (JPM) and (JPM) leaps; Finerman owns (JPM); Finerman owns (MSFT); Finerman's firm owns (MSFT); Jon Najarian owns (CSCO), is short (CSCO) calls; Jon Najarian is short (V) puts

For Anthony Scaramucci
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For Mike Khouw
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