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Stocks On Track For Best Year Since 2003

Stocks inched higher on Wednesday, with the Dow and the Nasdaq managing to squeak out 2009 closing highs, as investors shied away from making bold bets on equities with just one trading day left in the year.

Bullish investors are now cautiously holding their breath hoping that by the close of trade on Thursday December 31st, stocks will record their best year of gains since 2003.

After moves like we had this year, how should you trade going forward?

Strategy Session with the Fast Money traders

I’d be long the TBT, reveals Brian Kelly of Kanundrum, as a bet interest rates are going higher.

I think Treasurys are very valuable at these prices, says Steve Cortes. I think of Treasurys in the same way I think of lawyers. Everyone hates them until they need them.

I would stay in the stock market, counsels Joe Terranova. I think the next earnings season is going to be phenomenal. I see no reason to jump off the boat.

I’m bullish technology into next year, adds Pete Najarian. And I’m also bullish ag as well as utilities.

In 2010 I think dividends are going to be an important theme, adds Steve Cortes. I agree with Pete; I’m also bullish utilities. However I don’t agree with Pete on his ag trade. I think the commodity trade is among the most crowded trades I’ve ever seen in my career.

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TOPPING THE TAPE: OIL HITS 7-WEEK HIGH

U.S. crude oil futures closed higher on Wednesday above $79, after a government inventory report showed crude stocks fell last week, although less than expected.

Also cold weather in much of the nation as well as and turmoil in Iran and Nigeria supported the bullish tone of the oil market. However energy traders say gains were limited by strength in the dollar.

What’s the trade?

Historically oil does well from Christmas Eve into early January, explains Joe Terranova. Take a look:

% change in oil from on biz day before Christmas Eve to Jan. 4th, 5th, or 6th

2000 7
2001 10
2002 1
2003 5
2004 3
2005 10
2006 -10
2007 5
2008 3

I’d be long oil into the first week of January and then get flat, Terranova says.

I’m short oil, counters Steve Cortes. The Canadian dollar got pummeled on Friday and I took it as a cue to short oil. And from a technical perspective, I think oil is extended.

If you want to play oil I’d do it with BP , counsels Pete Najarian. I like their dividends.

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TOPPING THE TAPE: CHIP NAMES LEAD TECH

Investors are keep a close eye on the tech sector after Kaufman Bros upgraded Marvell and Nvidia to "buy" from "hold," saying it expects the chipmakers to benefit from an improving PC market.

Analyst Suji De Silva raised his price target on the shares of Marvell to $25 from $20, and said he expects the company to begin to realize benefits from its efforts to diversify outside its core storage business.

De Silva also raised his price target on the shares of Nvidia to $22 from $14, saying he expects the company's professional solutions and consumer products segments to drive growth in 2010.

What’s the tech trade?

Western Digital is trading at single digit P/E’s and NTAP is almost at single digit P/E’s, explains Pete Najarian. I think both stocks have a lot of upside.

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INVESTOR’S INTELLIGENCE: LOWEST READING OF BEARS IN 22 YEARS

It appears that bearish sentiment has reached its lowest level in 22 years, at least by one measure.

According to a new investor’s intelligence poll, stock market pessimism among newsletter writers fell to the lowest level since April 1987.

Although that may appear bullish on the surface some investors take the reading as a contrary indicator. When that last happened in 1987, just six months later the stock market crashed.

What must you know?

While it seems extreme I don’t think we’re at a tipping point, says Brian Kelly. However, it’s worth watching.

I don’t think it’s a signal of a exuberating top either, says Joe Terranova. I wouldn’t worry.

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RECORD-BREAKING YEAR FOR OPTIONS ACTION

Options trading hit record volume in 2009 making it the 7th straight year of annual records for volume.

According to the Chicago-based Options Clearing Corp., the number of options on stocks, indexes and exchange- traded funds that changed hands in 2009 reached 3.59 billion contracts.

That’s higher than last year’s record of 3.58 billion.

With more traders turning to the options market we couldn’t think of a better time to check in with OptionMonster Jon Najarian.

See why he thinks they’re becoming so popular. Watch the video now!

You can find our interview with Jon Najarian at the end of the Word on the Street video.



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