The S&P 500 closed higher on Friday, giving the stock market a second straight week of gains as upbeat retail news reinforced hopes for strong sales this holiday season.
Also a surprise jump in the trade deficit led to a weaker dollar, which, in turn, led investors to put money to work in energy and natural resource names such as Freeport McMoRan .
What must you know about this market?
Strategy Session with the Fast Money traders
Volume was anemic on Friday, explains Steve Grasso. That scares me. And we can’t seem to break above 1100 in the S&P. We may be running out of gas, broadly. It’s becoming a stock pickers market. I don’t expect to see large groups move in tandem, anymore.
Last week the S&P was below 1070, reminds Joe Terranova after higher than expected unemployment. No we didn‘t break above 1100 but we also didn’t drop below 1083. I don’t think we’re going lower. I just think the market is consolidating.
I’m concerned about some valuations in this market, adds Guy Adami. For example, Amazon and Abercrombie & Fitch valuations just don’t make sense. It’s hard for me to believe that investors are going to chase into names such as these with unemployment going north.
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TOPPING THE TAPE: MALLRAT RALLY
Consumer shares led the way higher on Friday after bullish commentary from retailers Abercrombie & Fitch and J.C. Penney more than offset worries generated by a disappointing consumer confidence report.
What’s the retail trade?
ANF and JCP are high beta names, explains Guy Adami. Investors are chasing performance through the end of the year and these names should outperform on a positive tape. But I can’t get my arms around them for any other reason.
I’m watching Saks in this space, says Karen Finerman. They’re not cutting prices as aggressively as they did last year. That suggests the luxury space might be okay. And based on valuations I like Macy’s.
I’d look at a pairs trade. I’d get long JC Penney and sells Abercrombie against it, counsels Joe Terranova.
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TAKE YOUR POSITION: RETAIL TO REIGN IN RALLY?
The Retail HLDRs closed higher Friday ahead a slew of retail earnings earnings reports next week.
They include:
Mon: Lowe's, Pacific Sunwear
Tue: Home Depot, Saks, Target, TJX
Wed: BJ's, Chico's, Limited Brands
Thu: Gamestop, Sears, Williams-Sonoma, Gap
Fri: Ann Taylor
What’s the trade?
I think Home Depot is the stock to watch out of the list above, says Guy Adami.
I like HD too, says Steve Grasso but I’d want to see it break above $28 before getting long. That's been resistance.
I like Target , adds Joe Terranova, And I might think about shorting Sears.
Children’s Place and Target both look good to me, says Karen Finerman.
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GOLD, COMMODITY STOCKS HAVE BIG WEEK
Gold closed higher on Friday and traded within a striking distance of its record high as the dollar fell against a basket of currencies. However the weak dollar didn’t support oil. Crude prices fell on Friday, briefly touching a one-month low as bulging fuel inventories in the United States stirred demand concerns.
What’s the commodities trade?
I’ve been long RIG, explains Karen Finerman but at these levels it’s kind of rich. In the low 80’s maybe I’d be a buyer.
I’d shortApache, says Guy Adami. I think it trades down to the 80’s.
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OPTIONS ACTION: TRADERS BETTING ON SMARTPHONES
The traders are closely watching unusual options action in Palm . The stock has surged ahead of next week’s Pixi release and speculation is heating up that that company could be a takeover target.
What must you know?
The market rumor is Nokia could make an offer, explains Karen Finerman, but I wouldn’t make a bet in either direction.
If you’re looking to trade Palm, it seems to me that support is around $10.80, adds Joe Terranova.
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Trader disclosure: On November 13th, 2009, 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), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Grasso Owns (AAPL), (ABK), (ASTM), (BAC), (BGP), (C), (COST), (FAZ), (PFE), (MRK), (V), (WMT); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred, (BAC; Finerman's Firm Owns (FLS), Is Short (FLS) Calls; Finerman Owns (FLS); Finerman's Firm Owns (MSFT), (NOK), (PLCE), (TGT), (WMT); Finerman's Firm Is Short (USO), (IJR), (MDY), (IWM), (UNG); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (M); Finerman's Firm Owns (RIG), Is Short (RIG) Calls; Finerman Owns (RIG); Terranova Owns Crude Oil Dec. Futures; Terranova Owns (GS), (JPM), (SU), (AAPL), (GOOG), (JCP); Terranova Is Short (ANF)
For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBC)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (UA)
For Steve Grasso:
Stuart Frankel And Its Partners Own (CMCSK)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NXST)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (ROK)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
For Todd Gordon:
GAIN Capital's Managed Accounts Own Australian Dollar, Are Short U.S. Dollar
For Brent Thill:
(MSFT) Is Or In Past 12 Months Has Been An Investment Banking Client Of UBS Securities LLC
(MSFT) Is Or In Past 12 Months Has Been A Non-Securities Client Of UBS Securities LLC
UBS Securities LLC Has Received Compensation From (MSFT) In Past 12 Months
For Finerman:
On 10/12/09 Finerman's Firm Owned (WMT)
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