Both the S&P 500 and Dow closed lower on Tuesday in a session marked by low volume and choppy trading.
Stocks fell early in the session after revised government data showed the economy grew at a slower than expected pace -- although GDP expanded, it was up by only 2.8%, rather than 3.5%, which was the estimate last month.
However, the downbeat mood was tempered after the Fed increased its growth expectations for 2010 and minutes from the most recent FOMC meeting showed officials are growing more confident that the recovery is sustainable.
How should you trade this market?
Strategy Session with the Fast Money traders
That adjustment in GDP seemed pretty significant to me, muses Guy Adami. As far as I'm concerned the market is going up for reasons outside fundamentals.
From 3.5 to 2.8 is a sizable revision, agrees Karen Finerman. No doubt. But as an investor, in the short-term you can’t sit around and hope fundamentals move the market. However, I do think fundamentals will come into play, longterm.
There were people lining up on both sides of the fence in the attempt to interpret that GDP data, adds Tim Seymour. But I think the same trades live on. I continue to expect a weak dollar and strong commodities.
When in doubt, palms out, reminds Pete Najarian.
GOLD MAKES IT EIGHT STRAIGHT
Gold closed higher on Tuesday despite a slightly stronger dollar , as the precious metal remained firmly underpinned by the prospect of rising inflation and more gold acquisitions by central banks around the world.
Gold prices have risen 12 percent since the beginning of November, when reports emerged that India's central bank had bought 200 tons of gold from the IMF. Russia, Sri Lanka and Mauritius have all since also announced gold acquisitions.
What’s the trade?
If central banks buying gold are diversifying their reserves back from the U.S. dollar to gold or other assets, that is a sign that (investors) should stay long gold and short the dollar, Deutschetrader Michael Blumenroth tells Reuters.
As long as the market is thinking there is inflation to be expected next year...central banks are buyers rather than sellers, and there is fresh investment money flowing into the market, there is no way you want to sell gold, he adds.
But there has to be a scenario in which gold goes lower, muses Guy Adami. I just haven’t figure it out. When everyone gets out of it – and I think they will – this trade will get very messy.
If you’re in the space you’d better have protection, reminds Pete Najarian.
RICK’S TURKEY: THE DOLLAR
The dollar held steady Tuesday afternoon against a basket of currencies following the release of FOMC minutes in which officials said they would keep a close eye on the falling value of the U.S. dollar, even as they noted that the currency's recent depreciation had been orderly.
What’s the trade?
I think it’s bullish for emerging markets, says Tim Seymour. I expect to see a transfer of wealth.
MARKET BUZZKILL: OIL
US crude futures ended lower on Tuesday on expectations that reports out Wednesday would show crude inventories rose last week.
"We don't like the GDP figures and we're worried about a potential build in crude stocks," explains Tim Evans, analyst with Citi Futures Perspective.
With oil settling at its lowest levels now in about a month how should you trade?
Chevron and ExxonMobil have performed well over the past several days despite oil bouncing around $80, says Pete Najarian. I’d keep those on your radar.
If you’re looking for short ideas, I’d look at Caterpillar , says Guy Adami. I’d go short with a tight stop.
MARKET BUZZKILL: FINANCIALS MARKET’S WORST SECTOR
Financial stocks showed weakness throughout the session after published reports said the Federal Reserve asked banks that took TARP money to submit plans outlining how they will repay the government.
Also, IMF chief, Dominique Strauss-Kahn, was quoted as saying half of the losses suffered by banks could still be hidden in their balance sheets, though more so in Europe than in the United States.
What’s the trade?
I think it’s a good dialogue but I don’t see the government asking banks to repay back TARP right away, muses Karen Finerman.
If you want a short idea look at Wells Fargo, says Guy Adami. That one has trouble around $28.
BULL MARKET OR BS?
It’s no secret that pundits can’t agree about the direction of this market. But few are more bearish than Peter Schiff, president of Euro Pacific Capital.
What makes him so certain that the economy is about to implode? And where is he putting his money as a result?
Watch the video and find out for yourself!
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Trader disclosure: On November 24th, 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), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Seymour Owns (AAPL), (BAC), (EEM), (FXI), (INTC), (VIP), (F); Finerman's Firm Owns (AAPL), (PLCE), (MSFT), (NOK), (WMT), (FLS), (PDE), (RIG), (TGT); Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO), (UNG); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Calls; Finerman Owns (BAC) Preferred, (BAC); Najarian Owns (AAPL) Call Spread; Najarian Owns (BRCD) & (BRCD) Calls; Najarian Owns (CLF) & (CLF) Calls; Najarian Owns (INTC) & Short (INTC) Calls; Najarian Owns (DELL) Calls; Najarian Owns (DE) Call Spread; Najarian Owns (FCX) Call Spread; Najarian Owns (INTC) & (INTC) Calls; Najarian Owns (LAZ) & short (LAZ) Calls; Najarian Owns (BKS) Puts
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