Caution prevailed in the market on Wednesday with stocks breaking three days gains and closing lower.
For the first time in a long time the S&P 500 and the dollar traded in tandem with a weaker dollar failing to spark a rally. In fact a bevy of energy and mining shares – which typically climb when the dollar is weak – instead declined.
What must you know to trade this market?
I don’t think this is the end of the weak dollar strong / commodities trade, muses Tim Seymour. But right now the market is focused on the consumer and whether the recovery will be weak. That's what dragged down stocks.
Avoid focusing on one or two days of data, adds Karen Finerman. Things that don’t normally happen together – happened today. So stocks declined on a day when the dollar declined. I don’t make much out of it.
But do keep an eye on the dollar's relationship with the broad market, says Guy Adami. A lot of pro investors think the turn is coming -- and the dollar goes higher -- but I don’t see it.
And don’t forget that the S&P found support from the financials, adds Pete Najarian. And even in a weak tape the S&P 500 held 1100. That's bullish.
TOPPING THE TAPE: WEAK DOLLAR BOOSTING COMMODITIES
Either concerns about a weak dollar or inflation -- or both -- sent gold higher on Wednesday. The precious metal rose to record highs above $1,150 an ounce.
Gold also received a boost after the Wall Street Journal said hedge fund guru John Paulson is looking to step-up his bet on gold with a new fund. The paper says Paulson plans to start a new fund dedicated to investing in gold-related shares and gold derivatives set to launch on January 1.
What’s the trade?
I expect to see central banks around the world continue to buy gold as a hedge against the dollar, says Tim Seymour. That suggests the price of this precious metal could go much higher.
The gold trade seems so crowded to me, muses Karen Finerman. I’d stay away. And if you need to play the threat of a weak dollar and inflation, I just think there are better places to put your money.
In this space, I’m watching FCX, says Guy Adami. Yes it turned and went lower at the end of the day but I don’t think it means anything.
AG NAMES HIGHER...TIME TO BUY?
Potash, Mosaic and other ag names traded higher on Wednesday, in part due to positive comments from CNBC’s Jim Cramer who said that agriculture is the next sector that's ready to break out to the upside.
Also, the Department of Agriculture raised its spot price forecast last week citing production shortfalls.
What’s the ag trade?
I’m watching Bunge , says Pete Najarian.
Deere is on my radar as a potential short, adds Guy Adami.
The only commodity trade I’d have on right now is ag, counsels Joe Terranova on the Halftime Report. I don’t like the action in oil or gold right now. I think both could be setting up to fall.
TOPPING THE TAPE: HOMEBUILDERS SHAKE OFF BAD DATA
Both Pulte and DR Horton closed higher despite a report out Wednesday, which showed U.S. housing starts fell unexpectedly in October to their lowest level in six months.
Specifically, the Commerce Department said housing starts dropped 10.6 percent to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the percentage drop was the biggest since January.
What’s the housing trade?
I would not be buyer of any homebuilders, says Tim Seymour. There’s just too much uncertainty in the space.
$28 appears to be huge resistance for Home Depot, says Guy Adami. I like the name but that’s a concern.
MARKET BUZZKILL: (RIMM) PULLS TECH LOWER
Shares of Research In Motion dragged down the tech sector on Wednesday after BMO Capital downgraded the BlackBerry maker saying it faces rising competition and a consumer shift toward cheaper phones.
Analyst Tim Long lowered his rating to "Market Perform" from "Outperform" and reduced his price target to $64 from $100.
Long is concerned about RIM's reliance on Verizon Wireless, which he said accounts for about 30 percent of the company's revenue. He said RIM's new BlackBerry Storm 2 is an improvement over the previous model, but lacks some "compelling features that consumers are now looking for" and isn't getting the marketing push from Verizon that rival Motorola is getting for its new Droid phone.
What’s the tech trade?
I think it’s entirely possible that RIM bounces off the downgrade, says Pete Najarian.
In the space, I’m watching NTAP, says Guy Adami. I wouldn’t rush in to own it but this stock certainly has momentum.
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Trader disclosure: On November 18th, 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 (POT), (NUE), (AAPL), (BAC), (EEM), (GE), (INTC), (FXI), (VIP); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (FLS); Finerman's Firm Owns (MSFT), (NOK), (PLCE), (TGT), (WMT), (DRI); Finerman's Firm Is Short (USO), (IJR), (MDY), (IWM), (UNG); Finerman's Firm And Finerman Own (WFC) Preferred; Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (FLS), Is Short (FLS) Calls; Najarian Owns (DELL) Calls; Najarian Owns (EXPE) Calls; Najarian Owns (FXI) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (LAZ) & short (LAZ) Calls; Najarian Owns (MCD) Call Spread; Najarian Owns (RIMM) Call Spread; Najarian Owns (QLOGIC) Call Spread; Najarian Owns (TXN) & Short (TXN) Calls; Najarian Owns (YHOO) & (YHOO) Puts; Najarian Owns (BG) Call Spread; Najarian Owns (TXN) & (TXN) Call Spread
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