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Is Market on Sugar High or in Broad Uptrend?

On Tuesday chatter on the floor had everything to do with the current bullish sentiment in the market and whether investors were irrationally or justifiably exuberant.

Stocks bounced mid-day erasing their worst declines despite a very disappointing consumer confidence report. “It was among the worst readings since 1974,” says Fast trader Patty Edwards, “and 1974 wasn't exactly a fabulous period for the markets."

Nonetheless, stocks gained.

What should you make of it?

Some pros take the action as a sign that that the market is in a broad uptrend. “When you're able to get bad news and shrug it off, it's a very positive sign, says Michael James, senior trader at regional investment bank Wedbush Morgan in a Reuters interview.

Pete Najarian sees it the same way. “Look at the way the Nasdaq bounced of the lows. Look at the big names industrials such as Deere rallying in the face of negative news,” he says.

Najarian thinks investors who believe in global growth are using any sell-off as a buying opportunity. And bulls had reason to buy. Boeing said Tuesday that it had received commitments from five airlines for 496 airplanes with the new, more fuel efficient engines.

If you're a trader, Brian Kelly understands positioning for further gains but he suggests stepping back and looking at the context. “This is a bear market rally,” he says emphatically.

Kelly points to strength in the bond market to confirm his thesis. “We’ve had a big run up in stocks but the bond market hasn’t responded negatively. If you listen to the bond market it’s saying strength in the stock market just isn’t there.”

But that doesn’t mean Kelly would play it short - not by any means. “Momentum is too strong,” he says. “Right now the market is on some kind of sugar high.”

Trader Steve Cortes is more skeptical. “Around 1120, I liked stocks. I thought the valuation made a lot of sense. But with the S&P around 1200 I’m growing cautious of the market,” he says.

Part of his concerns rest with weakness in China and a decision from Beijing over the week-end to effectively increase reserves which lenders must set aside with China’s central bank.

With China committed to curtailing inflation, he thinks it’s a mistake to pin hopes of a rally on emerging markets growth, especially growth in China. “The Shanghai Composite is performing poorly and I think the under-performance continues.”

Instead, Cortes suggests looking at risk off trades. “For the first time, perhaps in my entire life, I’m actually longgold ,” he says.

Trader Patty Edwards is also cautious. If you’re looking for retail plays she still likes Nordstrom and Target but adds, “in general I fear the middle market consumer is getting squeezed.”

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MCDONALD’S NEARS ANOTHER RECORD

McDonald's continued to rise Tuesday, nearing another record. But how much longer can the fast food giant be considered a super value?

What’s the trade?

Pete Najarian thinks P/E levels are fair and the yield at 2.7% is attractive. “Also they’ve got growth in Asia and the menu is drawing in customers,” he says. “I think there’s still upside.”

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HOMEBUILDERS POPPING ON UPGRADE

Shares of KB Home were flying high after Susquehanna upgraded the stock to a ‘Neutral’ rating on Tuesday morning. It was just one of several upgrades for the homebuilder space.

Is now the time to jump in?

Brian Kelly doesn't think so. "It’s a great time to buy a house but not housing stocks," he says.

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DOLLAR STORE DOMINANCE

Dollar General popped Tuesday after the company raised its full year profit forecast as sales surged. But will the dollar stores keep eating Walmart's lunch?

Find out from Brian Sozzi, Senior Research Analyst, Wall Street Strategies.

Get all the details. Watch the video now!


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Trader disclosure: On August 30, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Najarian owns (AAPL); Najarian owns (C); Najarian owns (MS); Najarian owns (MSFT); Najarian owns (MCP) calls; Najarian owns (CLF) calls; Najarian owns (UNP) calls; Najarian owns (DLTR) calls; Najarian owns (MCD) calls; Najarian owns (NTAP) calls; Cortes is long Gold; Cortes is long (WMT); Cortes is long (SO); Cortes is short the Euro; Cortes is short (BAC); Edwards owns (PM); Edwards own (APA); Edwards owns (XLK)

Brian Sozzi
**No Disclosures

Sarah Rotman
**No Disclosures

For Patty Edwards
Trutina Financial owns (AMZN) For Clients
Trutina Financial owns (AAPL) For Clients
Trutina Financial owns (CBI) For Clients
Trutina Financial owns (C) For Clients
Trutina Financial owns (GOOG) For Clients
Trutina Financial owns (MCD) For Clients
Trutina Financial owns (MSFT) For Clients
Trutina Financial owns Gold for Clients
Trutina Financial owns Silver for Clients

For Brian Kelly
Accounts managed by Brian Kelly Capital own the Euro
Accounts managed by Brian Kelly Capital own (MON) calls spreads
Accounts managed by Brian Kelly Capital own (JJG)
Accounts managed by Brian Kelly Capital own (MCP)
Accounts managed by Brian Kelly Capital own (SPY) options
Accounts managed by Brian Kelly Capital are short (SLV) options
Accounts managed by Brian Kelly Capital are short (JJC) options


CNBC.com with wires.