The housing sector giveth and it taketh away. One day after bullish existing home sales data ignited a rally, a sharp drop in new home sales gave investors pause.
That data combined with rising mortgage delinquency rates suggests the current recovery is delicate at best.
Investors took it as further confirmation that the Fed will likely leave interest rates low for some time – a sentiment expressed earlier in the week by Chicago Fed President Charles Evans on CNBC.
What must you know to trade this market?
As a result of the home sales data, we’re seeing a weaker dollar , explains Joe Terranova. That’s on a belief the Fed exit plan just got pushed back a little further, he speculates. As a result, I’m carefully watching the action in energy . The lower dollar is taking commodities higher and I expect that trend to continue.
I’d take a long position in the homebuilders on the negative news, reveals Brian Kelly of Kanundrum. Homes have never been more affordable and we have low supply. All that’s needed now is demand and I expect to see that improve into 2010.
I have to take the other side of that trade, counters Jared Levy of Peak6. I think homebuilders face headwinds next year. I’m a call seller.
I would look to sell dollars short-term, reveals Todd Gordon of Forex.com. The dollar has climbed substantially recently and now I’d play the greenback for a pullback.
COMPLACENCY IN THE MARKET
Options traders are closely watching the action in the Vix , which fell to its lowest level in 16 months earlier this week.
What must you know?
The Vix is below 20, reminds Jared Levy. I’m concerned about complacency. I think moving forward we see a pop in the Vix and a selloff in the S&P.
The traders are also closely watching the action in Google which traded around $610 intra-day, above an important technical level.
What’s the trade?
I’d stay with Google, counsels Joe Terranova. I think their earnings will be phenomenal.
Google broke above $600 which was support, reminds Todd Gordon. I’d be long with a $590 stop.
OIL HIGHER FOLLOWING CRUDE INVENTORIES
Oil traded above $74 on Wednesday, buoyed by a sharp drawdown in U.S. crude stocks and an unexpected fall in gasoline inventories
How should you trade?
I think the trade is long refiners, counsels Joe Terranova. Look at Sunoco , Frontier and Holly.
I’m playing it with Tidewater, adds Brian Kelly.
FORD MAKES DEAL FOR VOLVO
Shares of Ford traded higher on Wednesday after the automaker said it expected to finalize the sale its Volvo unit to China's Geely in the first half of 2010.
The deal would be the largest acquisition of a Western auto brand by a Chinese company.
What’s the trade?
I don’t like the Ford chart, says Todd Gordon. I’m a seller.
I’d sell the January 10 puts, counsels Jared Levy.
FAST & FURIOUS: THE KEY QUESTIONS INTO THE CLOSE
BUY MOT? Broadpoint reiterated Motorola at a buy on Wednesday; should you get in?
I’m not a buyer, reveals Joe Terranova
BUY NEWSPAPERS? Wells Fargo upgraded both Gannett and the New York Times; should you buy?
I think the sector still sees pain and I’d sell into the strength, says Jared Levy.
BUY YAHOO?Yahoo traded higher as its resumed Overweight at Morgan Stanley; should you buy?
I’m a buyer, reveals Brian Kelly.
BUY DOLLAR? With the dollar weaker following a 2-week rally, is this a buying opportunity?
I think the dollar goes lower in the short term, speculates Todd Gordon.
CALL THE CLOSE
Joe Terranova: Stay active
Jared Levy: I’m a seller.
Brian Kelly: I’m a buyer.
Todd Gordon: I’m a buyer.
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Trader disclosure: On Dec. 23rd, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman Owns (GLNG); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (MSFT), (WMT), (GLNG); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (BAC), (EEM), (INTC), (POT); Najarian Owns (MS) & Short (MS) Calls; Najarian Owns (MGM); Najarian Owns (HK) Call Spread
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