On the final trading day of the year, experts on the street are looking ahead to 2010, with the big question looming of whether 2009's market rally can be replicated, or whether a major pullback is on the horizon. Despite a better-than-expected jobless claims number, stocks are trading to the downside during a shortened trading session, so what are your keys to a successful play on the market right now?
Fast Money Strategy Session
In Thursday's trading, the bulls to have checked out for the year, as stocks trade to the downside during the session, although there are several pockets of the market showing strength. Steve Cortes of Veracuz highlights the resistance level experienced by the S&P around the 1120-1130 level this week, and thinks the market will simply limp through the end of today's session. Jon Najarian sees the potential to break through this technical level in early 2010, despite a possible "bumpy road" for stocks. He expects a dip in early 2010, followed by some "aggressive buying" in the second two weeks of the month.
Data on moves in January can also be looked at on an historical level. Birinyi Associates research shows that when the S&P 500 experiences a yearly move above 20%, the following January averages upward swings of 3.55%. Katie Stockton of MM Partners agrees that January looks to finish strongly, although she expects a short-term pullback in the first week or two of the month, a result of certain stocks being overbought prior to the year's end. She also doesn't see the 1120-1130 resistance level as a big benchmark and thinks the breakout for the market is already underway, setting up a positive trend for the next month.
But will investors be lured into taking profits off the market's strength? Brian Kelly of Kanundrum thinks the big story is the dollar . If the dollar gets stronger over the next few weeks, he thinks the market could be poised for a sell-off. As long as there is liquidity, as long as money is cheap, the market will go higher, he says.
Hot Trade of the Year: Commodities
Commodities have been the hot trade throughout 2009, but is this strength in commodities set to continue through the new year? With the dollar weakening in Thursday's trading, commodities are benefiting. Is this space a smart play, or should you be scaling back on your investments?
Brian Kelly thinks the only direction for commodities is up, but focuses on oil . The supply/demand of oil is pretty tenuous, he says, with only around 300-400,000 barrels of excess supply. If you believe in global growth and if you believe that China is going to grow any faster than 8-9%, he predicts that oil could be headed to $87 or $97 per barrel. Katie Stockton sees the oil ETFs, specifically the OIH, as oversold on a relative basis and suggests this as a way to play a potential upside in the commodity.
Taking the dissenting position, however, is Steve Cortes, who thinks the commodities trade is extremely overcrowded, which makes for a dangerous trading environment. He points out that the trade is predicated on China, which has begun to lag the US in terms of the recovery over the last 4 months.
Comeback Trade of the Year: Financials
One sector that has been at the center of the economic turmoil over the past two years, the financials have also been some of the strongest to rebound, doubling since the March lows. There are major shifts in the industry with Morgan Stanley's John Mack and Bank of America's Ken Lewis serving out their final day at the head of their respective companies.
Although for most of 2009, bets on the financial sector have been profitable, are these stocks looking to pop in 2010, or will they be facing substantial headwinds moving forward?
Katie Stockton points out that the major financial ETF is oversold on a relative basis, suggesting that it looks similar to the energy space and thinks it stands to benefit from rotation early in the year. Jon Najarian likes plays on Bank of America over Citigroup, pointing out that BAC is positioned well to deal with the IPOs and new share issuances in the next year, underwriting which also stands to be profitable for JPMorgan and Goldman Sachs . Insiders he has spoken to at Bank of America have told Najarian that the first quarter of 2010 stands to be a "blowout" as far as M&A business, possibly pushing the stock up to $25. Steve Cortes agrees, but thinks stocks like Goldman Sachs and Morgan Stanley are better suited because they have less exposure to home mortgages.
Tech Trade for 2010: Apple?
Early reports estimate that Apple could sell in the ballpark of 10 million tablets during 2010 could be a big revenue driver for the company, how do you play Apple stock? Steve Cortes reads market movement favoring Apple over Amazon, with traders betting that the former company will likely control the space. There is plenty of speculation about the device, which is rumored to have a touch screen and could potentially serve many more functions, "this is the game-changer," says Jon Najarian. Look to January 26th, he says, when the world will get its first look into the new product from Apple.
Key Sectors/Stocks into 2010
What sectors and stocks do the traders have their eyes on going into 2010?
Jon Najarian: Apple and Google make tech the sector for 2010, he says.
Brian Kelly is looking at Agriculture stocks suggesting names like the DBA , Mosaic and Potash.
Katie Stockton has her eyes on the EFA and EEM heading into 2010.
Call the Close
Around the horn, are the traders buying or selling into the end of the year?
Katie Stockton: Sell on the close if you're short-term
Jon Najarian: Stocks will drop into the close
Brian Kelly: Buy on today's weakness
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CNBC.com with wires