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Are We Headed Back To November Lows?


After stocks closed out their worst January ever analysts immediately tried to make sense of the decline. Remember, January performance traditionally serves as a harbinger for stocks for the rest of the year.

Most say what bothers them most is the sharp slide in companies traditionally considered well positioned to ride out an economic downturn (firms as Procter & Gamble or Unilever ). That, they say, underscores the severity of investor pessimism.

"We're in for another tough year," muses Dean Barber, president of investment firm Barber Financial Group. And he doesn’t see investor optimism returning in a meaningful way, anytime soon.

"You have consumer sentiment at an all-time low, job losses that have exceeded the total number of job losses in the '81-'82 recession; we're 13 months into the latest recession, so people feel bad."

Worst January Ever

Does that mean more declines lie ahead?

According to Dover Management CIO Doug Cliggott, the short answer is yes.

“The fundamental indictors seem to be deteriorating, he says, not bottoming. (He’s talking about things such as orders for non-defense capital goods, orders for consumer goods, hours worked in manufacturing etc.)

And don't don't hold your breath waiting for that to change. Cliggot says any turn in the market will take time. “The average downturn after the average financial crisis plays out over 3 or 4 years, and this is worse than average.”

So how should you trade?

Long biotech and long healthcare,” Cliggott says. And stay away from everything cyclical.

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Trader disclosure: On Feb. 2nd, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (EEM), (FXI); Macke Owns (DIS), (MS), (SDS), (MCD); Finerman's Firm Owns (DNA) & (DNA) Call Spread; Finerman's Firm Owns (MSFT), (XBI), (IBB); Finerman's Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (USO); Najarian Owns (AMGN) Call Spread; Najarian Owns (BMY) Calls; Najarian Owns (DRYS) Stock & (DRYS) Puts; Najarian Owns (EEM) Call Spread; Najarian Owns (FCX) & (FCX) Short Calls; Najarian Owns (GDX) Call Spread; Najarian Owns (MSFT) & (MSFT) Short Calls; Najarian Owns (MS) & (MS) Short Calls/Put Spread; Najarian Owns (V) Call Spread with wires