The Fast Money traders are no more encouraged by this move higher than they were by the move lower.
Tuesday’s rally is nice if you’re long, says Karen Finerman, but it doesn’t feel any more healthy than a similar move down. It’s just panic and fear. There’s not focus on fundamentals. I don’t think things should be worth 10% more today than they were yesterday.
Guy Adami agrees. The people who drove this market lower are the same people driving it now, he says. I think the next 500 points are up and then we turn right around.
The sharpest rallies come in bear markets, adds Jeff Macke. Sell the rips.
The trading you’re seeing now is driven by an enormous amount of short covering, adds Tim Seymour. However, I’m encouraged that we saw the market shrug off bad news in consumer confidence.
WAS THAT THE WASHOUT?
Total S&P 500 Returns After VIX Spike
Vix Return 6
Date Spike Months Later
10/24/08 79 ?
10/8/98 46 99%
8/5/02 45 4%
9/20/01 44 39%
11/12/97 38 55%
1/14/91 36 54%
8/6/90 36 19%
SOURCE: Whitney Tilson, T2 Partners
I can’t find any encouragement in this VIX spike, says Jeff Macke. It think it’s kind of meaningless.
GOLDMAN LAGS RALLY
Goldman Sachs turned in a lackluster performance on Tuesday after reports suggested that it could be caught in a Volkswagen short squeeze. Porsche’s plan to increase its VW stake to 74% sent short seller scrambling.
Lots of institutional investors were long Porsche and short the amount of Volkswagen embedded in the Porsche stock, explains Karen Finerman. But the losses were so massive it made the market nervous.
Also, it’s worth noting, after plunging double digits at the open shares of Morgan Stanley ended the day substantially higher while shares of Citigroup closed higher on deal chatter.
RETAILERS SHAKE OFF RECORD LOW CONFIDENCE
Despite record low consumer confidence retailers surged Tuesday with behemoths such as Wal-Mart , Target, and Sears leading the advance.
If you give me a 5 year timeframe I would get long Wal-Mart soon, but I think if you wait you can get it lower.
On a valuation basis I would own Target today, adds Guy Adami. And I’d look at Gap . They’re running their stores much more efficiently.
The recession worries me, adds Tim Seymour. How do we value next years earnings when we don't know how bad job cuts will be?
I have very little exposure to retail right now, adds Karen Finerman. Although lower oil will certainly help, it’s the jobs issue that’s most important to this sector. People won’t shop if they’re concerned about employment.
EMERGING MARKETS SURGE 20%
The Emerging Markets ETF soared higher on Tuesday on hopes that global socks will follow America’s lead.
I think China is starting to look very good at current valuations. Also Russia looks ridiculously cheap.
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Trader disclosure: On Oct.28 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 (WMT), (SDS), (UUP), (MCD); Seymour Owns (AAPL), (F), (MER), (TSO), (RIO); Seygem Asset Management Owns (EEM); Finerman Owns (GS); Finerman's Firm Owns (TSO), (VLO); Finerman's Firm Is Short (BBT), (IYR), (IJR), (MDY), (SPY), (IWM), (USO); GE Is The Parent Company Of CNBC
Terranova Owns (VLO), (NOV); Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.
Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV); Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO
Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (CNW), (OFC), (DLM), (DRH), (DLR), (EPR), (EXR), (FL), (SLB), (LNET), (MAC), (DBC), (DBV), (SKT), (UA), (BLV), (VV), (CLB), (GWX), (IGE); Virtus Investment Partners Owns Seagate Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of (FSMXX); Virtus Investment Partners Owns Seagate Technology Tax Refund Rights; Virtus Investment Partners Owns More Than 1% Of Shares Of Incitec Pivot Ltd.; Virtus Investment Partners Owns More Than 1% Of Shares Of Essex Property Trust Inc.
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