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Prop Desk: Market Break Out?

Although stocks appear to be stalled broadly, Brian Kelly has spotted signs that one area of the market may soon breakout!

And that area is housing .

You read that right. Brian Kelly thinks housing could be about to make a sharp move higher.

What’s made him turn so bullish? Two new developments.

U.S. lumber futures rose to their highest level in 29 months last week, ahead of the spring building season. (Remember to take advantage of a federal housing credit of up to $8,000 contracts must be signed by April 30 and the deal closed by June 30.)

Also, Morgan Stanley upgraded Home Depot stock to "overweight" from "equal-weight," saying it's finally optimistic about the world's largest home improvement chain's prospects as housing markets begin to recover.

Considering these developments, what’s the housing trade?

40% of US GDP is related to housing, so when I see lumber futures move, it says to me the economy is going to get better, explains Brian Kelly of Kanundrum. And lately lumber futures have been surging. I think the way to play it is with a long position in Plum Creek Timber .

However, it's important to remember that housing is an early cyclical group, counters Gary Kaminky. People tend to get into these stocks 6 months to a year before any kind of recovery. Don't make a mistake and think that the strength is a signal that these businesses are currently thriving and growing. They're not.


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Trader disclosure: On February 8th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (BTU), (GS), (INTC), (NUE), (MSFT); Kaminsky Is Short (LULU); Najarian Owns (AAPL) Call Spread; Najarian Owns (GILD) Call Spread; Najarian Owns (INTC) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (TCK), Is Short (TCK) Calls; Najarian Owns (XLF) Calls; Najarian Owns (CLF) Call Spread

For Dennis Gartman
Funds Managed By Dennis Gartman Are Long Australian Dollars, Canadian Dollars
Funds Managed By Dennis Gartman Are Short British Pound Sterling, Euro,
Swiss Franc
Funds Managed By Dennis Gartman Own (BWLD), (DRI), (PNRA)
Funds Managed By Dennis Gartman Are Short (MT), (NUE), (PEP)

For Brian Kelly
Kanundrum Capital Owns (HOV)
Kanundrum Capital Owns (PHM)
Kanundrum Capital Owns (TOL)
Kanundrum Capital Owns (WY)
Kanundrum Capital Owns (PCL)
Kanundrum Capital Owns (RYN)
Kelly Owns (HOV) Calls
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short U.S. Dollar
Kelly Owns (FXE) Puts

For Tim Seymour
Seygem Asset Management Owned (MTL) On 2/3/10
Seymour Owns (AAPL)
Seymour Owns (BAC)
Seymour Owns (EEM)
Seymour Owns (ETFC)
Seymour Owns (F)
Seymour Owns (INTC)
Seygem Asset Management Is Short (VALE)
Seygem Asset Management Owns (GFI)
Seygem Asset Management Is Short (BIDU)
Seymour Owns (FXI)


CNBC.com with wires

Symbol
Price
 
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%Change
HD
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PCL
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SPDR SP HB
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