Consumer Confidence Up Ahead of Holiday Season - D.R. Horton (NYSE:DHI), SPDR Gold Trust (ARCA:GLD)

Don't look now, but the economy just might be on the path to real recovery.

One consumer confidence poll, just released Friday, showed the fourth straight month of increases, handily beating analyst expectations. The Thomson Reuters/University of Michigan's preliminary reading on their index of consumer confidence came in at 67.7, significantly higher than the 64.1 they reported in November. "U.S. consumers appear to be ending the year in a better mood," said Paul Dales, an economist at Capital Economics in London. Part of the increase could be attributed to the holidays and holiday spending, but that hardly tells the whole story. We've also seen increases in employment data, and with gas prices staying relatively lower than they have been, consumers are feeling more confident in their circumstances. There seems to be a sense that we have hit bottom and are now rebounding. "Although the recent increase may provide that little bit of support to spending in the malls in the coming weeks, it won't lead to a long and lasting acceleration in consumption growth," said Dales. While that's true, it's also missing the point entirely. The economy is such a tricky thing to capture properly, and any small boost might be the one missing link that pushes the entire mess forward. In other words, this Christmas season's spending increases might be enough to kick-start the economy heading into 2012. If we can build on that, we might finally grow out of this morass we've been in for four years. Think of it like jump-starting a car because the battery is dead. All you need to do is give it a nudge and get it running. If you can do that, and you can drive it a while, the alternator will recharge the battery for you. This bump in consumer confidence just might be the jump-start we need.

ACTION ITEMS:

Bullish:

Traders who believe that the economy is on its way up might want to consider the following trades:

Retailers, such as Walmart WMT and Kohls KSS will give you exposure to the lower and medium ends of the shopping spectrum. If consumer confidence stays high, they could benefit from Christmas sales and after-Christmas specials.

Prefer an ETF to broaden exposure? How about the SPDR S&P 500 ETF SPY? This ETF attempts to match the S&P 500 performance. The better it does, the better the fund does.

If things truly turn around, housing will be the sector that makes the most difference. That is to say, there is no full turnaround without a housing rebound. Given that, a strong economy could be a benefit to homebuilders like Toll Brothers TOL and DR Holton DHI.

Bearish:

Traders who believe that this is a temporary uptick in the economy may consider an alternate positions:

Buy gold, of course. With Europe still burning, the US economy and its dollar are the last places of refuge. If things stay crummy here, gold becomes attractive at almost any price. You could consider buying the metal itself or an ETF like the SPDR Gold Trust GLD.

If you prefer stocks in actual companies, another good gold play is a mining company, like Randgold Resources GOLD or Golden Star Resources GSS, the latter of which operates in Africa. Could be risk/reward multipliers there.

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