Trading In And Around Bear Market Rallies

Tuesday, 25 Nov 2008 | 6:14 PM ET

On Tuesday investors were asking one another if they agree with Barton Biggs. That is, are we really in for the mother of all bear market rallies?

As the head of Traxis Partners, a New York City based hedge fund, and former Morgan Stanley chief global strategist, Barton Biggs has been well known in the investment world for over 30 years. And he’s been influencing markets for most of that time.

On November 24th he wrote an article published by the Financial Times in which he stated a case that stock markets around the world are poised to explode higher.

Although the article is quite long he essentially isolates a handful of factors that could trigger a monster rally. Those factors are:

- the market is near a point of maximum bearish sentiment
- valuations are cheap
- stock markets are oversold
- hedge fund redemptions are probably 80% finished

He concluded by saying, "at the bottom of a panic, the news doesn't have to be good for stocks to rally. It just has to be less bad than what has already been discounted."

Let’s cut to the chase. Is Biggs right? Where do the Fast Money traders stand on the potential of a monster rally?

Zack Karabell

“I think even if you assume a complete global recession for the next 18 months, the market is oversold on a fundamental basis,” says the Academic. “I’m definitely a buyer”

Guy Adami

“I wish the market had flushed out a few days ago when it plunged, says the Negotiator. ”But it didn’t. However you can’t trade the market you wish you had, you have to trade what you have. So, I agree. It looks like the market wants to go 1000 points higher.”

Karen Finerman

”I’m skeptical of the whole thing,” counters the Chairwoman. “We’ve already seen a thousand point move in the Dow over the past few days. And with the government having to bailout Citigroup, the financial crisis seems to still be pretty serious, at least to me.”

Jeff Macke

“It looks like a nice shorting opportunity with a stop above 860 on the close of the S&P ,” bristles the Wolf.

Trading in a Bear Market Rally
The Fast Money traders share tips on trading in and around bear market rallies. They're joined by Zachary Karabell, of River Twice Research.

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Trader disclosure: On Nov.25, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (MSFT), (WMT), (UUP); Macke Is Short (TM); Najarian Owns (CTX) Calls; Najarian Owns (ETFC); Najarian Owns (MOT) Calls; Najarian Owns (PHM) Put Spread; Najarian Owns (PRU) Calls; Najarian Owns (UYG) Calls; Finerman's Firm Owns (DNA) And (DNA) Calls; Finerman's Firm Owns (CSCO), (XLF), (MSFT); Finerman's Firm Is Short (USO), (IYR), (IJR), (MDY), (SPY), (IWM)

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