'Fast Money' Recap: Rally Has Legs

NEW YORK ( TheStreet) -- The markets soared Wednesday as central banks moved to ease the liquidity crisis in Europe.

The Dow Jones Industrial Average jumped 490.05, or or 4.24%, to 12,045.68. The S&P 500 rose 51.77, or 4.33%, to 1245.96. The Nasdaq was up 104.83, or 4.17%, to 2620.34.

Mark Fisher said on CNBC's "Fast Money" TV show that the huge rally caught a lot of traders underinvested. He said today's action could lead to a pretty significant rally to the end of the year.

Dennis Gartman said it's pretty difficult to fight when all the central banks take concerted action, along with China's rate cut.

Pete Najarian said that the rally slammed the VIX, which was down 9.27% for the day.

For a breakout of some stocks from a recent "Fast Money" TV show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."

3 Stocks I Saw on TV

Joe Terranova said the central action was significant because Europe's problems became a problem for "all of us," and not just the Europeans.

Stephen Weiss was a little skeptical of the rally. He said he didn't really participate in the rally, noting he was buying on dips but not getting carried away. He said today's action amounted to the "easy lifting," with the more difficult task ahead on Dec. 9, when the EU meets to try to resolve the sovereign debt issue.

He said today's action helped buy time but was not the bazooka needed to deal with the massive problems.

Terranova said the powerful rally will force investors to act when they didn't have to. He said money managers now have to make some allocations.

Mike Khouw agreed, saying that was certainly true in the options markets, where there was above average volume in all sectors and bullish activity on average. He said the market tends to rally for several days after huge rescue efforts, and he expects that will be the case here.

Jim Caron, of Morgan Stanley, said the central banks took the right course of action in providing enough funding in the short term while slowing the delevering process. He said the move is a positive for those who want to invest in risky assets, but he reminded the panel it's a short-term fix and much needs to be done to resolve the more serious sovereign debt issues.

Caron said QE3 is definitely on the table and could come in the first quarter of 2012.

Scott Wapner, the moderator of the show, said bank stocks surged in today's rally. Terranova said he was looking beyond the large cap names to such steady performers as Mastercard ( MA), Visa ( V) and Evercore Partners ( EVR).

Weiss said the situation is getting so bad in France that the government may nationalize its banks. He said the problems of the banks exceed their market caps.

Wapner moved to the materials and industrial trades, which enjoyed "monster" gains. Gartman said it wasn't surprising to see US Steel ( X) up 15%. He said investors have to own steel, copper and railroads because they are part of the global growth story.

Terranova said he was long Caterpillar ( CAT) but not Joy Global ( JYG), which he thinks is an acquisition target.

Weiss said he wasn't buyer of a steel because he thinks there is an oversupply of steel in the world, especially in China.

Shifting to the currency trade, Wapner said the U.S. dollar fell sharply against the euro. But Gartman said it was important to remember that while the euro gained against the dollar, it lost against against other currencies. He said the euro still faces a lot of problems.

Natural gas was in the red today, down 2% and 19% year to date. Fisher said the decline is ridiculous and believes natural gas could be close to a bottom. He said there could be a bull market in natural gas six months, as the country turns away from Canadian oil and moves toward exporting liquified natural gas.

Although crude was up for the fourth consecutive day, Fisher said it actually underperformed. He reminded the panel of the dangers of underestimating the impact of an Iranian embargo. He said the situation could get ugly because Iran has two to three times the amount of oil as Libya.

Najarian said a good way to play the energy trade is to invest in the big integrated names, which have exposure to natural gas and oil.

Turning to the volatility playbook, Najarian said the VIX is at level where investors should want to own volatility, not short it. He said the VIX has been able to stay above its 100-day moving day average.

Mike Khouw said a good way to play the VIX with with put spreads to hedge your portfolio or through the iPath S&P 500 VIX Short-Futures ETN ( VXX).

Looking to year-end trading, Paul Hickey, of Bespoke Investments, said December historically has been a good month for stock returns, adding the best performing sector over the years has been health care equipment and services.

For a technical look at the commodities, Abigail Doolittle, of Peak Theories Research, said the bearish nature of the CRB index leads her to believe that the commodities are poised for a significant downward move into the new year. Gartman said she may be on to something.

There were no final moves.

-- Written by David Tong in San Francisco.

>To contact the writer of this article, click here: David Tong.

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