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Dow's Best Week Since Late July

The Dow hit a new 11-month high and capped its best week in two months on Friday after Procter & Gamble as well as other stocks advanced on positive brokerage comments.

It was the market's second straight week of gains. This week, the Dow rose 2.24%, the S&P 500 gained 2.45% and the Nasdaq advanced 2.50%.

The S&P 500 is now up 58% since hitting a 12-year closing low in early March, largely due to optimism that an economic recovery is gaining traction.

How should you be positioned?

Strategy Session with the Fast Money traders

I find it hard to be optimistic, reveals Guy Adami. Unemployment is very high and people are not spending. I know that THE market just keeps going higher but it scares me.

The stock market is a leading indicator, reminds Tim Seymour. I think it says earnings will be decend going forward. And although the market may pullback, I don’t expect to see a sharp pullback. I’m a buyer on dips.

I’m not sure what to do, admits Karen Finerman. The valuations in this market just don’t make sense yet the market moves higher.

I’m turning into a Debbie Downer, reveals Joe Terranova. I expect to see a correction through the end of the month. But I too think it will be shallow.

If you’re looking for a trade, look at Abercrombie & Fitch, adds Adami. At 22 time forward earnings I think valuations start to catch up. I’d short this stock with a stop out above $35. But valuations don’t make sense.

If you want to be long, I think investors could be long American Eagle, adds Karen Finerman and maybe short ANF against it.

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TRADE OF THE WEEK: BULLION BACK IN BIG WAY

U.S. gold futures ended lower on Friday as a dollar bounce triggered profit-taking, and investors worried that the bullion market could retreat further due to a lack of demand for the precious metal outside of the investment sector.

However what a week it was. Gold made 18-month highs earlier in the week as investors sought the precious metal as a safe haven from inflation.

What’s the trade?

I’ve been long gold but now I’m off the train, reveals Joe Terranova. It seems to me that market wants to pull back. If gold falls below $1000 I think the market shakes out. And I’m concerned about copper, which just can’t seem to get a 3-handle on it.

It’s true that copper has been trading in a range between $2.75 - $2.95, adds Tim Seymour. It hasn’t broken to the upside but it hasn’t crashed below support either. And back to gold, at 30 times earnings I think the miners are overvalued, he adds. They scare me.

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TRADE OF THE WEEK: GE, INDUSTRIALS POWER ON

GE surged 13% this week with favorable comments about the industrial sector from Goldman Sachs generating a tailwind for this and other stocks since September 9th.

Goldman had said the industrial group has a tendency to outperform when the Institute for Supply Management manufacturing index makes a sustainable move above 50, the threshold for expansion.

What’s the trade?

I’m watching Honeywell, says Guy Adami. It’s been a slow and steady winner.

With GE and Caterpillar both near their 52-week highs then pulling back, that says to me the entire market is ready to pull back.

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ENERGY SHARES UP AS OIL BACKS OFF

Shares of Chevron closed higher on Friday after Credit Suisse upgraded the firm to ‘Outperform” from ‘Neutral.’ However oil prices slipped toward $72 as investors took profits from a 5 percent rally earlier in the week.

What’s the energy trade?

I think a lot of speculators are moving out of oil and into nat gas, says Joe Terranova. As far as I can tell there’s no trade in oil.

If you want to play nat gas I’d play it with Apache , adds Guy Adami, not the UNG.

Personally I like nat gas long-term because it will probably be part of the energy solution, adds Karen Finerman. Therefore, I’m bullish long-term. However, don’t play the UNG – instead I’d look at Chesapeake.

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TRADE OF THE WEEK: HOMEBUILDERS LOWER THE BOOM

Shares of Toll Brothers and KB Hometraded higher on Friday after both were both upgraded by J.P. Morgan Securities, which said the housing sector will continue to recover over the next 24 months and drive the current rally in homebuilder stocks.

In sharp contrast, the Toll Brothers CEO unloaded 1.5 million of his shares earlier in the week.

What’s the trade?

Next week we get some economic numbers about housing, explains Tim Seymour. The proof will be in the pudding.

And don’t forget there’s a movement in Congress to extend the $8000 incentive for homebuyers and potentially expand it. That’s bullish for the sector.




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Trader disclosure: On Sept. 18, 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 (AA); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman's Firm Owns (NOK); Finerman's Firm Owns (BAC) Preferred Shares And (BAC), Finerman Owns (BAC) Preferred Shares; Finerman's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY), (USO); Finerman's Firm Owns (APC); Finerman's Firm Is Short (BWA); Finerman's Firm And Finerman Own (RIG); Finerman's Firm Owns (WMT); Finerman's Firm Owns (ARO); Terranova Owns (AA) Puts; Terranova Owns (CAT) Puts; Terranova Owns U.S. Dollar Futures; Terranova Is Short (WFC), (HST), (JWN), (FCX)

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