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Trader Talk with Bob Pisani

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  Wednesday, 2 Apr 2008 | 9:12 AM ET

Back Tomorrow With Posts

Posted By: Bob Pisani

I'm not on the market floor today and won't be blogging. I will be back tomorrow so I'll see you then.


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 1 Apr 2008 | 4:10 PM ET

Q2: Good Market Start But We Need Less Selling In Rallies

Posted By: Bob Pisani

The second quarter has begun, a big rally on big volume held to the close.

Let's review where we are, and where we might be going. At the close of the first quarter, the typical trader position was long commodities and bonds, short stocks. This trade has been on for so long that traders are beginning to wonder, when does "The Great Unwind" begin?

Today's rally:

--Started as short covering in financials in Europe
--Continued with a rally in the dollar
--Saw bonds & commodities weaken
--Saw new money enter for the start of the quarter

Is this it? It looks like the potential start of "The Great Unwind," but there have been so many dashed hopes that there is a great deal of skepticism yet.

What we need now: continuing unwinding. We need to see:

--Dollar rally modestly and stabilize
--Commodities drop more.
--More air out of bonds
--S&P 500 should move above its most recent high of 1381 at the end of February
--S&P Financials should move decisively above the recent highs of 359 (trading today around 356), which will break the pattern of lower lows and lower highs that began in October.
--Volume picks up on up days, drops on down days
--Selling into rallies stops

Those who desperately want to believe that "The Great Unwind" is about to begin point to gold: 14 percent off its highs. Bottom line: this is a good start, but we need to stop selling into rallies. Nothing else will convince.


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 1 Apr 2008 | 3:14 PM ET

What's Up--Or Down With These Oil Prices?

Posted By: Sharon Epperson

This morning traders on the NYMEX floor were buzzing about the oil plunge under $100 a barrel, perhaps marking the bursting of the commodities bubble.

After all, the U.S. dollar index popped over 1 percent, as the dollar rallied sharply against the Euro and other currencies, and the resulting metals meltdown sent gold under $900, bottoming this session under $872.

That's the lowest price for the precious metal since the end of January. Platinum slid another 6 percent today, silver and palladium are down over 2 percent.

Our colleague Bob Pisani has been talking about investors moving money from commodities to stocks as a major factor contributing to the two-day slide. But from my perspective, it's a different story in the energy markets today than the rest of the commodities complex.

Oil bulls have shown tremendous resolve. "It's pretty impressive," says Joe Terrranova, director of trading for MBF Clearing Corp. "Everyone right now would think oil would be at $98 or $99," but with 30 minutes left in the trading session oil is firmly back over $101.

Gold has seen a more than 10 percent correction, since the March 19 record close of $1003. Oil, too, is more than 10 percent off its all-time high of nearly $112. But oil prices have bounced back from the $98-101 range several times in the past 3 weeks. NYMEX crude futures haven't settled below $100 since the beginning of March.

Even after hitting an intraday low of $98.65 on March 20, prices still closed above $101 a barrel on that day. In fact, prices have closed above $100 for the past 18 consecutive sessions.

Demand concerns that seemed to weigh on the market this morning haven't abated, but Terranova says they've largely been priced into the market. Pump prices keep rising--at a record near $3.29/gallon today for regular unleaded gasoline, according to AAA. Many drivers may be opting for partial fills rather than topping off the tank.

The latest MasterCard SpendingPulse survey shows retail gasoline demand slid 1.7 percent year-over-year, continuing a trend of declines over the past 9 out of 10 weeks. But that hasn't hurt RBOB gasoline futures today--they've also turned positive on the session. Trader Anthony Grisanti says the May gasoline crack could close over $10. Remember it was at a record low just about two weeks ago.

Gasoline is actually helping to support oil prices today. Though the consensus for tomorrow's oil inventory report is that crude stocks rose over 2.8 million barrels, gasoline supplies are expected to have fallen 2.7 million barrels, according to analysts surveyed by Platts.

If that draw is greater than expectations, Stephen Schork of the Schork Report says the market may read that as supportive for prices. Remember, yesterday Stephen said the oil bears might look like April fools today...and oil prices are still over $101 in this volatile session...at least for now.

Questions? Comments? energysource@cnbc.com

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  Tuesday, 1 Apr 2008 | 11:43 AM ET

Has Dollar Reached Bottom? Not Clear Yet

Posted By: Bob Pisani

What's up with the dollar rally? In Europe, youhavetwo big European banks announcing writedowns ; in Japan, you have the worst business sentiment survey in four years, so initially it was more Euro-Yen weakness than dollar strength.

But after 10 am ET, the dollar rallied on the slightly better than expected ISM news . Is this the bottom in the dollar? Not clear; but bad news globally would counter the continued Fed rate cuts.

As a result, commodities are down big. Gold, silver, palladium down 4-5 percent. Gold in a correction: gold is at a 6 week low, down 14 percent from its recent intraday highs. Who cares about six week lows?

Hey, when was the last time gold was in any kind of downtrend? 2006, and that lasted for all of a month. What happened? In addition to the dollar strength, yesterday was the futures expiration day...today you have to get out or take delivery. Looks like a lot of people (speculators) opted to get out. Same with platinum, palladium, and silver.

Looks like they took the money, and put some of it in the stock market. Financials, specifically.


Questions? Comments? tradertalk@cnbc.com

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  Tuesday, 1 Apr 2008 | 9:29 AM ET

Q2 Same As Q1? The Writedowns Begin

Posted By: Bob Pisani

OK, the second quarter is starting a lot like the first quarter. How so? Once again, a bunch of financial institutions are out with big writedowns, or trying to raise capital. Sound bad? No, no, say the bulls, you don't understand, this is good. They're getting all the bad stuff out--no, this is the bottom, this is the kitchen sink quarter (please ignore the fact that the first quarter was supposed to be the kitchen sink quarter: hey, it's an art, not a science).

UBSwrote down an additional $19 billlion on U.S. real estate and other assets , then announced they will be seeking to raise $12 billion via a rights issue. Results were so stellar Chairman Marcel Ospel said he would be leaving. UBS up 9 percent.

Not to be outdone, Deutsche Bank made a similar announcement, taking $3.9 b in writedowns . They said "conditions have become significantly more challenging during the last few weeks."

The response? European banks are higher because because this is the kitchen sink quarter! Pay attention! Banks are reducing their exposure! There's less uncertainty! We've seen the worst!

Lehmanis raising at least $3 b in capital . Meredith Whitney at Oppenheimer, who has now become the ax in this space due to some prescient calls in October, said that there would be a "barn rush" of capital raising in the coming months from financial firms. Lehman up 7 percent.

Oh, and pay no attention to the curmudgeons at Morgan Stanley, who issued a report this morning say that investment banking was taking its worst hit to earnings in twenty years. They think longer-term return on equities will fall due to de-leveraging and more regulation that will force banks to hold more capital as a cushion.

Finanicals are rallying. Merrill up 6 percent. Citi,Fannie Mae , Morgan Stanley, Wachovia up 4-5 percent.

What does all this mean? Enormous frustration and confusion for professional traders. Think about it: a lot of traders right now think it's unlikely there will be any kind of huge follow-through on the upside, and unlikely there will be a huge follow-through on the downside. How do you short a stock, for example, when you know that the government is backing them? How do you go long when the earnings have been so severely damaged?

Meantime, commodities down big again...gold stocks weak.


Questions? Comments? tradertalk@cnbc.com

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  Monday, 31 Mar 2008 | 4:41 PM ET

First Quarter Worst Performers

Posted By: Bob Pisani

The quarter ended quietly, with many burned out from false rallies. The S&P 500 down 10 percent, the worst quarter since Q2 2003. While financials got the attention, there were plenty of other poor performers.

First quarter:

Tech down 15 percent
Telecom down 14 percent
Financials down 14 percent
Healthcare down 12 percent

Gold stocks were one of the few gainers, up 7.1 percent; though oil was up, most energy stocks were down.

The second quarter starts with the Street net short and large amounts of cash on the sideline; the hope for the bulls is that lower prices will begin attracting some of that cash.


Questions? Comments? tradertalk@cnbc.com

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  Monday, 31 Mar 2008 | 1:33 PM ET

Lowry's Tech Analysis: "Calls To Buy May Be Premature"

Posted By: Bob Pisani

So where's the bottom? Lowry's, the oldest technical analysis service in the United States, put out a long note this morning in which they somewhat sourly concluded, "Our analysis of the forces of Supply and Demand suggests that calls to buy may be premature."

Why? Because the average bear market is a lot worse than this. The average bear market since 1949 has seen the S&P 500 decline 29 percent from its high to its low. The current bear market is down only 18.6 percent from its high (Oct. 2007) to its low (March 10).

Other bear markets have been far more severe:

1973-74: 49.9 percent
2000-02 50.5 percent
1987: 35.9 percent
1994: 8.3 percent

That last one, in 1994, was the shallowest decline in the last 60 years.


Questions? Comments? tradertalk@cnbc.com

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  Monday, 31 Mar 2008 | 11:35 AM ET

Drug Stock Scorecard: MRK, SGP Losers--Pfizer A Winner

Posted By: Bob Pisani

Who’s the winner and loser in drug stocks today? As mentioned earlier, Schering-Plough down 25 percent (!) and Merck down 16 percent pre-open on a study that showed that the companies cholesterol lowering drugs Vytorin and Zetia were not more effective than less expensive drugs.

There is now serious question about whether Schering can survive as an independent company, given its dependence on Vytorin.

We know the losers, but here's who traders tell me are the likely winners:

1) Abbott, which has a big cholesterol franchise, and new products coming to market.

2) Pfizer, because there is less competition for Lipitor until the patent expires.

3) AstraZeneca, because of their statin drug Crestor.

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  Monday, 31 Mar 2008 | 9:08 AM ET

Paulson Proposal A Bit "Mind-Less" For Markets

Posted By: Bob Pisani

In theory, Treasury Secretary Paulson's announcement that he wants to shake up the regulatory environment on Wall Street is the main news.

Lehman's Roger Freeman noted that the new rules, which include a proposed merger of the SEC and the Commodities Futures Trading Commission, would benefit the NYSE and NASDAQ, "as the proposal calls for a simpler SRO [Self-Regulatory Organization] rule-making process among other things, which should make these exchanges more competitive." It would also likely increase trading volumes.

In reality, traders' minds are not focused on this proposal--it will not come to fruition for a long time; implementation is far away, and the second quarter is very, very close. Traders are concerned that bulls have been wrong about the first quarter--that it is not the bottom, not for the economic news and possibly not for the credit crisis.

Analysts have been taking down estimates for the first quarter for weeks, for everything from retailers to financials to oil refiners.

Earnings estimates for the S&P 500 are already negative for the second quarter (-1.8 percent); financials estimates are already down over 30 percent. There are new calls that the second quarter will be the bottom. Skepticism is very high now; this is good news, as it is well known that there are large amounts of cash on the sideline.

Elsewhere:

1) Schering-Plough down 22 percent (!) and Merck down 13 percent pre-open on a study that showed that the companies cholesterol lowering drugs Vytorin and Zetia were not more effective than less expensive drugs. Vytorin (which is a combination of Merck's Zocor and Schering's Zetia) is a big money-maker for Schering, accounting for 60 percent of its EPS.

2) Driller Noble up 4 percent on word it has signed a memorandum of understanding with Brazil's Petrobras for deepwater drilling rigs--the contracts are worth up to $4 billion.

2) Philip Morris International finally begins trading today under the ticker PM. The international business is growing much faster than the domestic tobacco business; Philip Morris USA will remain part of Altria Group.


Questions? Comments? tradertalk@cnbc.com

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  Friday, 28 Mar 2008 | 4:47 PM ET

After Tough Week, Street Looks to Q2

Posted By: Bob Pisani

By any stretch, it’s been a tough week for bulls: dismal economic news; no sign of a bottom in housing; financials have been unstable; and retailers have declined on concerns that not just March, but the second quarter, will be difficult.

Still, the markets held up well, considering the news. The Dow was down 1.1 percent, the Nasdaq eked out a small gain.

The issues are now around the second quarter. Has the Street factored in:

-Q2 economic weakness?

-Q2 writedowns for brokers & builders?

-Q2 consumer spending deterioration?

Given the miserable economic data this week, next week's raft of data is unlikely to surprise on the upside:

1) The ISM survey on Tuesday may be below expectations, certainly below 50 (which would indicate continuing contraction in manufacturing).

2) Domestic auto sales on Tuesday will be restrained by tighter credit conditions and the economic slowdown.

3) Nonfarm payrolls on Friday will likely indicate that the weakness in February has continued into March.

But once again, there is some good news:

1) Analysts are actively taking down estimates for the first quarter and are starting to look at the second quarter; this is the major reason the markets are having trouble advancing.

2) There is some hope that, if redemptions are not as bad as feared, we may get a modest rally at the start of the quarter as cash on the sidelines come back in.

The Street can now clearly see that, even if liquidity issues are being addressed, the broader economic statistics continue to look poor; the quicker it digests this news, the better.


Questions? Comments? tradertalk@cnbc.com

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About Trader Talk with Bob Pisani

  • Direct from the floor of the NYSE, Trader Talk with Bob Pisani provides a dynamic look at the reasons for the day’s actions on Wall Street. If you want to go beyond the latest numbers— Bob will tell you why the market does what it does and what it means for the next day’s trading.

 

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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