The S&P 500 closed at fresh 13-month highs – and above the technically important 1100 level on Monday -- with Ben Bernanke providing the catalyst traders had been seeking.
Specifically, Bernanke repeated that the Fed was likely to keep interest rates exceptionally low for "an extended period," a pledge that weighed on the U.S. dollar and drove investors to snap up shares of natural resource companies as prices of global commodities -- from gold to wheat -- shot higher.
However, Bernanke’s outlook was not without concern. In a speech before the Economic Club of New York, he also said the recovery would not be as robust as previously hoped, and rising unemployment and tight bank lending were significant headwinds.
What’s the trade?
It feels like the S&P 500 wants to go to 1120, speculates Tim Seymour. However, I think we struggle above that level.
I expect the melt-up to continue, adds Gary Kaminsky. And that suggests assets that are not cash-based will continue to outperform through the end of the year.
I agree, adds Karen Finerman. Dollars are just chasing product.
For me the point of reference is now 1100 in the S&P, adds Joe Terranova. I wouldn’t get out of the market unless we now slip below that critical level. Ben Bernake is telling the market he will allow the dollar to decline as along as it happens in an orderly way. As a result I think the trade is long commodities.
WHITNEY STRIKES AGAIN
Meanwhile, late afternoon some stocks pared gains after widely followed analyst Meredith Whitney made bearish predictions during in an interview on CNBC.
She said, " I haven't been this bearish in a year. I look at the board and every single stock from Tiffany , to Bank of America to Caterpillar is up but there is no fundamental reason for why these names are up, particularly in the consumer space."
What should you make of Whitney's comments?
It’s unlike her to speak so broadly, muses Karen Finerman. If her comments concern you, I’d ride the rally higher but also buy some protection.
BANKING ON THE BEST?
Meanwhile, investors are starting to second guess their outlook on banks after Meredith Whitney repeated concerns that the sector is not adequately capitalized and will need to raise more capital in the coming year – again on CNBC.
What’s the trade?
When I hear a comment like that I think back 6 months ago -- and remind myself how it would have moved the market, says Gary Kaminsky. But the market shrugged off her comment on Monday. That screams of a melt-up.
In the space I’d watch the regional banks downgraded by Fitch, adds Tim Seymour. Any bank with more than 10% exposure to commercial real estate could be looking at some serious setbacks.
> More: click here for CNBC’s full interview with Meredith Whitney
TOPPING THE TAPE: COMMODITIES LEADING THE WAY
The weak dollar sparked gains in commodities broadly with crude futures taking back all of last weeks’ losses.
Meanwhile, gold touched a fresh high above $1,130 an ounce on Monday as momentum from recent gains and a slide in the dollar index sparked fund buying of the precious metal.
What’s the trade?
In the long run I think gold goes higher, says Tim Seymour. However, I’m concerned about another metal; copper – it looks toppy to me. As a result I’d be a seller of PCU and FCX.
In the space I like oil services names however I have to admit I’m a seller of RIG calls because I think the stock is ahead of itself, says Karen Finerman.
I’m looking for M&A in the space, adds Gary Kaminsky. I don’t have targets on my radar but it wouldn’t surprise me to see an oil combination before year’s end.
TOPPING THE TAPE: RETAILERS RISING AS HOLIDAYS NEAR
The Retail HLDRs traded higher Monday ahead a slew of retail earnings reports this week.
Tue: Home Depot, Saks, Target, TJX
Wed: BJ's, Chico's, Limited Brands
Thu: Gamestop, Sears, Williams-Sonoma, Gap
Fri: Ann Taylor
Meanwhile Goldman said with the economy beginning to improve, high-end retailers are in a good position for recovery.
Adrianne Shapira said in a client note that in previous downturns high-end retailers have been hurt more than other retailers, but they've rebounded sharply once a recovery began.
As a result Shapira upgraded Nordstrom to "Buy" from "Neutral," saying the company has adjusted its expenses, inventory and product assortment to deal with the downturn.
She also upgraded Coach to "Buy" from "Neutral" and lifted her share price target to $42 from $37.
What’s the trade?
I'm curious to hear what TJX shows, muses Karen Finerman. But in retail, I really think that all roads lead to Walmart .
I like Best Buy and McDonald’s, adds Joe Terranova.
BEN, THE RALLY IS IN YOUR HANDS...
As we mentioned above, on Monday Ben Bernanke repeated that the Fed was likely to keep interest rates exceptionally low for "an extended period" in an effort to spark recovery.
How long should you expect a weak dollar? Find out from CNBC’s Steve Leisman! Watch the video below.
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Trader disclosure: On November 16th, 2009, 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), (EEM), (GE), (INTC); Finerman Owns (RIG), (FLS); Finerman's Firm Owns (CSCO), (RIG), (MSFT), (NOK), (PLCE), (TGT); Finerman's Firm Is Short (USO); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (WMT); Finerman's Firm Is Short (IJR), (MDY), (IWM), (UNG); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (FLS), Is Short (FLS) Calls; Terranova Owns (GS), (JPM), (SU), (AAPL), (GOOG); Terranova Works For (VRTS); Terranova Owns Dec. Crude Oil . Futures; Terranova Owns Dec. Gold Futures; Terranova Owns Dec. Nat Gas Futures
For Brian Kelly
Kanundrum Capital Owns (ELX)
Kelly Owns (ELX) Calls
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