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Use 2003 As Template For 2009, Says Terranova

On Wednesday both the Dow and S&P 500 closed at fresh 2009 highs largely buoyed by multinationals and other companies that benefit from a weak dollar ; the greenback slid to 15 month lows.

Positive tailwinds were also generated by new data on the labor market and housing sector, which showed the economy may be improving.

But the story of the day was gold , which continued on its record run inching that much closer to $1200 as investors sought this precious metal as a hedge against inflation and on reports that central banks around the world were buying gold to diversify their assets.

Retailers also came into focus after Tiffany and J Crew reported results that beat expectations.

What must you know to trade this market?

Strategy Session with the Fast Money traders

I’m looking at the recovery of 2003 as a template for 2009, says Joe Terranova. In 2003 we had a massive end of year chase for performance. I see the same thing happening this year. Also, the dollar is weak and that, too, is very fertile for stocks.

Also, the number of workers filing claims for jobless benefits fell by a surprisingly large amount last week, adds Steve Grasso. That makes me bullish. I also expect the S&P to go higher into year’s end.

I agree, says Tim Seymour. I interpret the numbers to mean that there’s real recovery in all areas of the economy. And the economic data also says consumers are spending again.

The momentum clearly remains to the upside, muses Guy Adami. But I think we’re getting late in that trade. I’m spooked by the fact that earlier in the week we heard that one in four homeowners owe more on their homes than they are worth. Yes, there’s momentum to the upside in the market but the rally won’t last forever.

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RICK’S TURKEY: DOLLAR IN THE DUMPS AGAIN

The dollar hit a 15-month low against a basket of currencies on Wednesday after Federal Reserve minutes showed policymakers saw the U.S. currency's recent decline as "orderly".

Traders dumped the dollar across the board, with the minutes reinforcing the view that interest rates will stay essentially at zero until around mid-2010.

What’s the trade?

Again, I’m using 2003 as my template. In 2003 the dollar closed on its low for the year and I think the same thing happens again this year, says Joe Terranova.

The dollar is now at 14 month lows against the yen, says Tim Seymour. Although I agree with Joe about dollar action through the end of the year, I also think it’s a signal of bigger problems to come.

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GOLD SURGES TO ANOTHER RECORD

As we mentioned above, gold made a record high for a second time this week due to dollar weakness and published reports which suggested India was "open to buying" more gold from the International Monetary Fund.

Gold has jumped nearly 13 percent since the beginning of this month as investors poured money into the precious metal after India's central bank first announced it had bought 200 tons of bullion from the IMF.

The central banks of Russia and Sri Lanka have separately said they had bought gold to diversify their assets.

What’s the trade?

Gold feels a little bubble-like, says Steve Grasso. But I still think it moves higher as long as the dollar continues lower.

If I were to play the move I’d probably do it with Newmont or Freeport, says Guy Adami. But I have to believe that there are scenarios out there that take down gold, he adds.

In fact Rick Santelli has three scenarios that could derail the gold bulls. They follow:

Rick's 'Bullion Bust' Scenarios
1) Geopolitical Unrest Spikes Dollar
2) "Stairs Up, Elevator Down" Pattern
3) Any Hint "Punch Bowl" Is Getting Drained

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OIL REVERSES HIGHER

Crude oil prices settled near $78 a barrel on Wednesday, supported by lower-than-expected builds in U.S. oil inventories last week, a weak U.S. dollar and gains on Wall Street.

Crude stocks rose 1.0 million barrels, the Energy Information Administration said, less than the 1.2-million-barrel increase forecast.

What must you know about the action?

Crude oil tends to fail around $80, says Steve Cortes of Fast Money's Halftime Report. I think it’s a sign that the consumer remains weak. If they were stronger oil would climb higher.

However, in the space, it’s natural gas that Fast Money trader Joe Terranova is closely watching.

I truly believe the current rally in natural gas has legs, says Joe Terranova. I think nat gas goes to 5.32 and then it breaks out to 5.50. In fact, I think nat gas is a better energy trade than oil.

I’m a buyer of Chesapeake off the trend, adds Steve Grasso.

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TOPPING THE TAPE: RETAILERS

Shares of Tiffany traded higher on Wednesday after the jeweler’s quarterly profit beat Wall Street expectations and the company raised its full-year forecast on Wednesday, saying early trends in November were encouraging ahead of the holiday shopping season.

On Monday’s Fast Money Citi retail analyst Kimberly Greenberger told us, “we ‘do’ think it’s going to be a blue box Christmas."

”The single highest correlating factor to spending among high end consumers is stock market returns with a 3-6 month lag. Given the rally we’ve had off the march lows I think that bodes well for a high end holiday.”

Separately, J Crew Group reported a quarterly net profit far above Wall Street estimates due to strong autumn. J Crew has been one of the few U.S. apparel retailers to see robust sales in a still-weak economy with some market mavens speculating it’s because Michelle Obama wears their garments.

What’s the trade?

There was a 28% short interest in J Crew, says Guy Adami. I think this was capitulation. But the valuations don’t make sense and I’d think about shorting this stock.

I’m bullish on Ralph Lauren, says Joe Terranova.

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MARKET BUZZKILL: FINANCIALS WEIGH ON MARKET

The traders are keeping a close eye on the financials with some of the biggest names in the space, including market bellwether Goldman Sachs lagging the S&P.

What’s the trade?

I’m out of Goldman as well as JPMorgan , says Joe Terranova. They closed below their 100-day moving average. I wouldn’t short them but I wouldn’t be long either.

The action in financials makes me a little worried, says Guy Adami. In this space I think the trade is from the short-side not the long side.

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THANKSGIVING TRAVEL UPDATE

Despite discounted air fares, fewer Americans are expected to fly during the Thanksgiving holiday, traditionally the busiest US travel time, according to US airline industry forecasts.

In fact, the Air Transport Association of America (ATA) said it expects a 4% drop in passengers during the 12-day Thanksgiving holiday period this year compared to the same period in 2008.

For further insights on travel trends this year the traders spoke with Michael Boyd, of Boyd Group International -- a leader in travel industry forecasting and research.

Considering this is the busiest time of year for travel, what should you know before you trade the sector? Watch the video and find out!



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Trader disclosure: On Nov. 25th, 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); Terranova Owns (SU), (GOOG), (AAPL); Terranova Owns (UNG) April 2010 Calls; Terranova Owns Gold Futures; Terranova Owns Nat Gas Futures; Grasso Owns (AAPL), (BA), (BAC), (C), (COST), (PFE), (V), (WMT)

For Steve Grasso
Stuart Frankel Owns (NYX)
Stuart Frankel Owns (SDS)
Stuart Frankel Owns (TBT)
Stuart Frankel Owns (PDE)
Stuart Frankel Is Short (QQQQ)

For Dan Binder
Jefferies Has Received Compensation From (BJ)
Jefferies Makes A Market in (COST)
Jefferies Has Received Compensation From (LOW)
Jefferies Makes A Market In (SPLS)
Jefferies Has Received Compensation From (USTR)


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