year i'm off monday sorry. but i wish you both a very happy new year it's been a pleasure as always working 2018 i can't wait for 2019. >> have a great trip. >> happy new year to everyone watching that does it for today for "closing bell." >> "fast money" begins right now. have a great weekend. "fast money" starpts right now. live from the nasdaq market site over looking noerkz's times square i'm melissa lee. carter wirth, brian kelly, jeff mills and steve grasso tonight on fast a wild ride but stocks having the first green week in what's been a red december if you missed the rally, don't worry, the chart master breaks down bha he says is the ultimate catch up trade plus if there is one things you need tosz heading into 2019 the strategist says it's this chart. what it is and what it means for the markets. but first we start with the december surprise on wall street stocks having one of the best weeks of the year with the s&p 500 up 4 percent this week as it looks like santa finally came.

consumer discretionary technology and financials just some of the best performing sectors on the week. but heading into 2019 can you trust in bounce? and are you trading or fading this week's big winners? steve grasso starting with you and start off with this bounce because there are people at home whip sawed by the action and they want to know, fade it or trade it, the markets after this week. >> i would trade the markets i think that we're -- the damage that lab done is terrible. but we're still -- it's -- so much has been done that we're due for the bounce we had the bounce early yerl in the week osh i should say the christmas eve massacre then the bounce. and then we are in for more bounces and maybe extended into january. >> so you would. >> i would trade it. i would trade it but you know where i stand, that i think the worst is yet to come in february, i think you see lower lows right now, people have to play catch up on the rebounce. >> do we believe what's gone on in the past three sessions >> i think we are in a tradeable

rally. you know, we talked in early december i said the correction probably wasn't over. a lot had to do with the fact that i felt techically speaking the market wasn't washed out no panic in the options market. that changed into christmas. what we saw the options market show some fear, the put call ratio blew out to levels we hadn't seen. then we saw levels we hadn't seen since the bottom in 2011, 2015, 2016 only 20% of stocks below the 200 day moving average i think we were due for the bounce i think we'll probably see resistance in the 2,600 level. but for now i think it's tradeable. >> i feel like it's a desk of bulls tonight. >> almost makts me want to be bearish but i can't. the price action this week. >> he is there. >> carter is here. >> okay. carter is here. >> carter is here b.k. it's okay. >> everything in my body wants to be bearish but i also want to be contrarian and i feel more

comfortable about stocks with elds yields at 271 on the 10-year after a 20% decline and a fed getting more dovish in 2019 to me, if i look out over the next three weeks to three months, you want to trade in stock market so, you know call me a bull here. >> jeff cited a important level. 26 hup often if you break down from well defined intermediate lows same as breakout you retrace the move to the level where the dead bodies are a lot of overhead supply, people hanging in and then got murdered over the past couple weeks if you get back to the 2,600 level you have considerable memory not only memory from people buying to be murdered but people buying well a day or two ago who want to book gains the further it rises the but the important thing is that the big week that's good or the fact that we had a terrible month, terrible quarter and it happened in a period where history suggests it shouldn't. this is a period you should

strength if statistics are what they are. >> this is the year that upset everything >> correct i would just say that the risk is you come in in january and it all goes kaplooy again and as opposed to to some january rally. >> you fade this. >> i think so. >> when you look at the sectors leading this we can, interesting, consumer discretionary up 5%. retail. >> retail. >> room for retail. >> look at xly, the consumer discretionary etf. now, remember this is 22% amazon and 10% home depot that's what you are talking here if i'm buying in the retail sector we know that online sales were great we know that the consumer -- the consumers were spending over the holiday period and so i want to buy the disrupter. so if you want to buy the etf appear xry you get amazon and home depot. >> how do you feel about consumer discretionary right now? >> consumer discretionary retail also, i think it's tradeable at this point in time what i don't like is the fact

that we got a reading -- consumer confidence yesterday, the expectations component of that was a little bit weak so i don't like that but i do think that retail has some upside from here if you think about the health of skourm, the labor market strong. wages now starting to accumulate to the folks a bit further down the income spectrum, the folks willing to spend the marginal dollar the savings rate elevated. from a consumer perspective i think they perform well in 2019. when you have a forward pe in the 13 range, i think for a trade it still has upside. >> you said -- it's so dominated by a few names the sector if you look at the equal weight versus the actual weight there is story the equal weight is down hard. the sector if can you call it that because it influenced by fear has held up well? the answer is no. >> when you look at the names they're usually the names that get hit first and usually recover first. when we talk about the tradeable bounce or at least three of us out of four talking about a

tradeable bounce i think you get the bounsz in the azmodan, home depot, mcdonald's home depot down 10% year to date mcdonald's okay. amazon is the one that leads or fails in that group. i think if the market does okay the next couple weeks you're seeing a bounce and in this as well. >> i want to go to financials. interesting week. >> yeah b.k. liked the financials >> i leak them. >> they've been so beaten up trading to low book value. look at bank of america trading at about 75% of book value unless you think that there is a recession coming and that book value is not going to be what it is today -- which i don't think is the case then you have to buy financials for this environment. >> that stuff is true. but it was also true at higher prices for the b.k.x to drop 20% in a month that's the biggest names in the plan sfwleet the book value hasn't been true a long time. >> it's not a timing tool. a timing true is whether it's oversold or not and it may all

be oversold. how much more with can you get from the bounce and how quickly does it tail fail. >> i don't think it lines up as bullish scenario i hear what b.k. is saying you but you don't have politics on your side. there is more regulation or just less deregulation. you're not going to have as we discussed wsh not having the leverage to make them growth stocks and with the yield curve these guys don't len money anymore i would fade this. i would fade the xlf. >> fade it. >> and also the double top that we talked about that carter pointed out on the xlf granted you have room there again. but it's definitely a fade. >> this was the area leading out of the election, the trump bump whatever you want for higher interest rates and regulatory relief on relative basis all the gains were given back. you can see the bottom panel is relative and top is the sector the two circles we have undone

all of the election move. >> you could have a trump bump and dem dump if you want to call it that for equal thing on the other side. >> external factors though i was talking to a analyst today on power lunch he was saying operationally the banks have been excellent in 2018 i said well that hasn't helped the stock price at all what's it doing 2019 if operationally they compelled in 2010 appear stock prices declined quickly. >> for us we thought deregulation was the catalyst to loan growth and we haven't seen that loan growth i think a big problem orp maybe catalyst of that was the $500 plus of repatriation wsh additional liquidity from the tax cuts maybe the they didn't mo need to borrow as much you could see the intermittent steepening of the yield curve that could be the poengts kamgtsist because i understand the value argument but i question that. a and as we go further in the

business cycle the curve will continue to flatten. i think this is an interesting point, the term premium has come down structurally the past number of decades. that gives the long data versus short dated maturity a shorter cushion. you could see a flatter yield curve even more ininvestigations of the kufrin that aren't necessarily associated with growth issues that's probably not going to be good for banks. >> moving to tech up 4% for the week carter, i feel like i know what you'll say. >> here too. >> but you own it yourself. >> is it the fact that tech has one of the worst months ever or is it the little blip up after the murder they have a phrase in the business called dead cat bounce. is this that it hits the floor off the 230 stories but it's just a bounce, the cat's still dead. >> this is one of the things where you look at the top holding in the xlk you get the apple, microsoft and visa oddly enough in there i think you're okay with microsoft.

okay with visa i actually own apple, still own it and you could -- you could get in tradeable issue with the technology sector where you want -- it is a trade it moment because apple is so overdone to the downside people want to get back in there it's a beloved stock. people want back in. we talked about in last night. you can trade it and then you could fade it in february. but i think tradeable at least for 30 days. >> the one thing is i don't want to make too much of a move today because today's move was pretty microscopic compared to the huge swings this week when we saw the market turn, we saw big cap text led alphabet turned. apple turned. >> think about if we are going into the slower growth environment that's when the stocks did fairly well and some of them relatively cheap. look at something like an apple is relatively cheap in this environment. >> all right we want to get this chart here we teased at the top. jeff brought it along. says it's the most important chart for 2019

why don't you explain. >> sure, i think the chart is interesting because it puts earnings growth in an economic fundamental perspective. i think a lot of what precipitated the october weakness was the fweer are fear that earnings estimates finally started to come down and folks started to price in negative earnings growth next year. flat earnings growth next year the idea is how realistic given economic fundamentals? let's say we get to 163 in earnings for 2018 plets say we do it again for 2019, flat earnings and then even give another turn lower in trailing multiples down to 15 or 14 or so. that's where we were in the market, a short time ago that's what the market was pricing in to a large degree you look at this chart and say, okay, how overblown is the growth scare how realistic are flat earnings next year? this is a chart machining pmi grapd up against the s&p fiefd earnings per share what you see is every time sthd

snpd fiefd earnings per share went negative in the past what you have seen the ism manufacturing index below 50 now we are closer to 50 than 60. i think you have seen peak in ism and drifting lower through the nextier. but it's not consistent with contracting or flat earnings we have chicago pmi over 65382% correlation with the national index. i think it rolls over but does so -- >> i wonder how much of that is the market telling us something? it never looks bad until it's bad. when you say will see that roll over the mechanic is telling us something when you have the conversation with clients they say what does the market see that we don't see right now? because everything looks rosy or blush. i think they're tell us something. and the market is telling us something, six to eight months out not now. >> it's interesting. six to eight months out maybe but on the shorter term you look it city economic surprise index all of knows as lows below zero,

suggesting there is chance for economic surprise, the economic numbers might come out better and that could be a catalyst for short-term bounce. >> the thing is it's peak. it feels like it's peak and the rate of change whether the earnings rechgss which are negative, whether the basic economic data globally it suggests the market which does look out three, six, nine months figured out the peak is in and there is more downside risk even if it's flat the question is it's all multiple impression with no e. does the e compress and somehow we're not anticipating it. >> yeah, i think that's certainly the question >> well if you missed this week's bounce back don't worry the chart master says he has the ultimate catch up trade into the new year we have the details. plus tesla surging today as oracle layer elsen named to the board of directors is he the adult in the room that investors have been waiting for? we'll tell what you it could mean for the stock later the most hated stocks on wall street rallying hard this woke. but it could be a bad sign for the market we explain live from mes uatisqre in new

york city. much more "fast money" right after this stirring, but everywhere else... there are chefs, bakers and food order takers. doctors and surgeons and all the life savers. the world is alive as you can see, this time of the year is so much more than a bow and a tree. (morgan vo) those who give their best, deserve the best. get up to a $1,250 credit on select models now during the season of audi sales event. ♪

♪ there's no place likargh!e ♪ i'm trying... ♪ yippiekiyay. ♪ mom. ♪ welcome back to "fast money. this next group of stocks have turned investors grown with envy that's right the most hated stocks on wall street in rally mode this week our bob pisani is at the new

york stock exchange with more. >> hi, mella there are signs short sellers made money this week according to ish market a basket of the most shorted names were down 17.5% week in the week. the least shorted were down 10.8%. that's a sign shorts were in the money np another sign. thompson reuters index the most shorted stocks in the united states was down about 18% going into this week it's rallied six% this week. outperforming the s&p which is only up a little more than 3%. that means the short bets are working out at least for the time being indeed some of the most widely shorted names have done well this week. it's likely a sign that at least some of the shorts have covered their positions. the list includes snap up 20% this we can. abercrombiey and fitch up 14 chesapeake energy up 14% countries ars entertainment

10.6%. trio home improvement. bed bad and beyond up 6% now of course you can't attribute this rally entirely to short covering that's silly the main factor in the rebound was the wildly oversold conditions we saw by the middle of the week. buyers clearly stepped in to buy beaten down names. that's number one. but on top of that we saw the likely end of tax loss selling which has been especially brutal in december. yesterday we saw a dramatic late-day sell off in bonds and a huge surge of buying in stocks that is likely to result in pension funds relgbting out of bonds into stocks. the bottom line is there is many factors in this week's midweek rally. back to you, melissa. >> thanks, bob bob pisani at the new york stock exchange two-part question. if a turn around is sparked by short selling does it matter to the overall markets, b does it matter to the individual stocks. >> i don't think so. you have to have the follow through, right

but let's say the short sellers are first buyers number one thank you very much for being short because you are putting buy support in the market. number two if that pulse everybody in and says you know, maybe we got a short-term bottom here you can get that rally. you can get momentum injury it's okay. >> only thing that matters if they lay back out if they cover and lay them back out then come to trading raenl, they're saying okay -- the market is giving you a gift we wished for a volatile market. we all wished for volatility as traders. you wanted something other than sideways motion. we've gotten what we wished for. and now if the shorts lay them out again then -- we just become in the real wide range, 200 handles in the s&p which is not terrible it doesn't matter -- >> well first of all those names there wasn't an important suffolk in that list, right. snap, 8 and $10 billion. all things 60, 70, 80%

they don't matter. the top five stocks are bigger than the bottom 250. little stocks because they got a business or don't. someone covers a short nothing to do with the market. it's just an individual who has a great win maybe thinking time to walk away. >> let's say you're an investor in one of the unimportant stocks as carter says. >> then it's infinitely important. >> do you think maybe this is the start of something lasting >> that's the interesting point. carter you may have an opinion on this. but is this shift in leadership does that support the yesterday of the tradeable bounce we see we see shorts rallying we see small caps rallying higher volatility stocks rallying does that risk-seeking behavior? does that support the bounce. >> the three things if you think on relative basis, eem peaked first down hard. semis and home builders. those three others are very headline areas all exhibiting impressive relative performance as the market -- they've not

that can mean something but this short or that short i'm not sure there is insight. >> the one thing, the assumption is you are extrap it laing the facts gnat heavily shorted stocks that people aren't just doing the five they're covering the shorts on the portfolio rebalancing the portfolio. these might be unimportant to some people. i mean i don't know who. but some people might not like them. >> but they're indicative -- great point because they are indicative what's going on you're not seeing the short covering that sticks out the way these names do it's indicative the market -- >> what's it a sign of in your view. >> it's a good sign when you see guys cover as we know this business as long as we've been in the business every rally starts with short covering. >> for more on what the market moves signal head other to cnbc.com i'm melissa lee. you're watching "fast money" on cnbc first in business worldwide. >> run forest, run. >> stocks soaring back in week and if you are looking for a way

to catch the rally, the chart master will tell you the one trade that could give you a running start. plus. i'm close friends with elon musk. >> you've got a friend in me. >> and talk about a friend with benefits tesla surging as larry elsen named to the board of directors. could he bome ecthe oracle of tesla? much more "fast money" right after this your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory.

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well back to "fast money." check out shares of tesla surging today after the company named oracle's larry ellison and kathleen wilson thompson to to the board as part of the s.e.c. settlement larry spoke in admiration of elon musk on oracle's analyst day. take a listen. >> you're telling me he is an

idiot. i want to know who you are so i know why should i believe you as opposed to my friend elon who -- and we're out here watching in rocket land? >> so will larry ellison turn out to be the oerk of tesla? is he independent enough, steve. >> as amazing as that -- looking at larry eltsen he was the maverick, the cowboy what's the beauty of the point of rerch, compared to elon musk he looks like the adult in the room he has a track record of success. so the market liked it b.k. in a nice call last night i said stay out short it he had a nice call he might have known something. just kidding but i would think you are running into resistance. i'd be a seller of it but today nice day for tesla. >> the fact the s.e.c. will now theoretically be off tesla's back that's huge. >> that's big. they settled making changes

larry ellison isn't independent to satisfy some. about but this is classic silicon value going public facebook had to bring in sheryl sandberg i think a meaningful move would be to bring something in that's an operator. that wall street can say that person will hit numbers and let elon musk be the creative genius he is. >> in terms of the price action you almost would have naught it would have been bigger, to move up 5%. that happens almost 12, 15% time in the stock the stock does that up and down np is it breaking out? it's been in range three years everyone knows the top at 385 does it break out to new highs that's the bet i would make. for now it's just a trading kmip up and down. and no one is really making money. >> it's that time. final trade time around the horn. >> carter. >> disney. offensive and testifiesive play. >> brian kelly. >> financials i talked about baepg of america one of the cheapest on the price to book ratio. >> the jeff mills. >> xlk i want to be in tech when

there is a drop people bay for growth people pay for growth. i want to be in tech. >> grasso. >> stock everyone hates down 57% year to date >> general electric. >> wow >> let me guess. >> i thought you got that without looking at the screen. >> mind reader >> tremendous. general electric i think we reached peak pessimism. >> that does it for fast see you back here monday at 5:00 don't leave. "options action" starts right after this break [leaf blower]

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hey there live at the nasdaq market site in times square. look who stuck around. d.k. fwis are getting ready. >> you're killing me smalls. >> small cap stocks burned investors the last few months. but mike khouw and carter wirth they are due for a bounce. they give us the trade plus. >> i'm no love i'm in love and i don't care who knows it. >> options traders lochg the banks this week. and one name in particular they see soaring in the new year. we'll tell what you that is.