Halftime: Market Flirting with Key Levels on S&P

It appears the winds have shifted on Wall Street with bulls enjoying a breeze at their backs.

After stocks put in their worst week since November 2010, on Monday positive momentum lifted the market with gains largely generated by two factors:

- James Bullard, president of the St. Louis Fed, said the U.S. economy should do well in 2011 and that oil prices are not currently a drag on the recovery.

- Billionaire investor Warren Buffett, chairman of Berkshire Hathaway, said in his widely read annual letter the conglomerate was looking to make "major acquisitions," a sign investors took to mean that stocks may be cheap.

These catalysts drove both the S&P and Dow solidly into positive territory.

How should you position now? What’s the trade?

Instant Insights with the Fast Money traders

Steve Grasso suggests watching the charts. In this market, “technicals are important,” he says. He’s focused on two key levels 1318 on the downside and 1331 on the upside.

Brian Kelly sees the charts a little differently. “1333 is the 78.6% retracement of the Libyan sell-off,” he says. “That's my line in the sand. If the market can’t get above that I think we have another leg down to deal with.

Aside from technicals, Kelly thinks market action in the days ahead will be all about oil. In other words if oil prices go up the market goes down and vice versa. “Do you think oil prices will stay high for a sustained period of time? I think they will,” he says. As you might guess, he’s cautious.

Grasso thinks the next big move in oil has everything to do with how Libya plays out. “We’re either going to see oil at $125 or at $85,” he says depending on whether Gaddafi goes into exile or fights till the death and “burns everything.”

Pete Najarian agrees that traders should be watching the action in oil but he’s not nearly as skeptical as Brian Kelly. Although Najarian concedes that “oil near $100, cramps the consumer” he also says “if we pull back toward $90, that could be a huge positive catalyst for the market.”

And Najarian sees other reasons to be cautiously bullish; namely recent action in the Vix. “We’re 20% off Thursday’s highs,” he says. That’s a bullish sign.

Zach Karabel sees the market a little differently. “If you’re someone like me who’s more concerned with fundamentals than technicals I’d pick entry points for good companies,” he counsels. In other words, he sees the sell-off as an opportunity.

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TECH TOPPING THE TAPE

Tech shares also topped the tape Monday with Hewlett Packard among the Dow's best performers.

What’s the tech trade?

Pete Najarian sees value in Hewlett Packard. "I think the sell-off was an over reaction and I think there’s still plenty of upside," he says.

Steve Grasso agrees. "I’m also a buyer," he says.

Zach Karabell is a little more cautious. "HP (still) has a lot of management issues they need to clear up," he says.

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Trader disclosure: On Feb 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karabell owns (FCX); Karabell owns (GOOG); Karabell owns (AAPL); Karabell owns (GS); Karabell owns (GE); Karabell owns (FXI); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (BWC); Grasso owns (C); Grasso owns (CSCO); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MT); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST); Grasso owns (S); Pete Najarian owns (F) bonds; Pete Najarian owns (MS); Pete Najarian owns (JPM); Pete Najarian owns (C); Pete Najarian owns (BAC) calls; Pete Najarian owns (GE); Pete Najarian owns (MU) calls

BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (EBAY)
Accounts Managed By Kanundrum Capital Own (GCX)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (TLT)
Accounts Managed By Kanundrum Capital Are Long Corn
Accounts Managed By Kanundrum Capital Are Long Soybeans
Accounts Managed By Kanundrum Capital Are Long Copper
Accounts Managed By Kanundrum Capital Are Long Oil
Accounts Managed By Kanundrum Capital Are Long US T-Bonds
Accounts Managed By Kanundrum Capital Are Long The Euro
Accounts Managed By Kanundrum Capital Are Long The British Pound

For Zach Karabell
River Twice Capital owns (QCOM)
River Twice Capital owns (ONG)
River Twice Capital is short (AA)
River Twice Capital is short (S)
River Twice Capital is short (SPY)
River Twice Capital is short (SMH)
River Twice Capital is short (QQQQ)
River Twice Capital is short (XLF)
River Twice Capital is short (XLI)
River Twice Capital is short (MA) puts
Karabell and River Twice Capital own (BRCM)
Karabell and River Twice Capital own (CSCO)
Karabell and River Twice Capital own (IBM)

For Steve Grasso
Stuart Frankel & Co and it’s partners own (AMGN)
Stuart Frankel & Co and it’s partners own (CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MSFT)
Stuart Frankel & Co and it’s partners own (NEM)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners own (AAPL)

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