Strategy Session with the Fast Money Traders
I said on Wednesday watch out below, reminds Guy Adami. I think we’re setting up for a wacky day on Friday. The Dow could touch 6900 but then bounce to 8000.
Most of the Dow 30 went into positive territory before the big sell-off, says Pete Najarian. Also investors seem to be getting comfortable with fear. The VIX suggests to me that the S&P could move in 40 point increments per day.
We told you yesterday to keep an eye on Target, adds Adami. And it closed higher. That was a trade. Then after hours the Gap reported numbers that don’t look that bad. They’re running the company better and at some point that will be a positive.
A lot of companies are building up incredible cash balances as compared to their equity price, says Zach Karabell. The fear of default is just not based in reality.
There’s not a lot of confidence in the market, counters Jeff Macke. People are trading terrified and something that creates it’s own reality. And it’s time to take in your shorts, he adds. You’re getting a years worth of moves in a day!
Citigroup lost as much as a quarter of its market value Thursday as mushrooming worries about whether the bank has enough capital to withstand billions of dollars of additional loan losses outweighed new support from its largest individual investor.
Saudi Prince Alwaleed bin Talal said he plans to increase his stake to 5 percent from less than 4 percent and called the bank's shares "dramatically undervalued" following a nearly 90 percent plunge since late 2006.
But investors were unimpressed, and many questioned the bank's ability to handle what are expected to be billions in additional credit losses and writedowns in 2009 as the global economy slumps into recession.
Meanwhile troubles continue to plague the rest of the sector as well. Shares of Goldman tumbled below their 1999 IPO price while JPMorgan cut 10% of its investment bank staff.
I can give you 10 different rumors in any given day, says Jeff Macke. I think the thing to do is back away from the sector.
Just because the market didn’t react to Prince Alwaleed doesn’t mean that it isn’t a big deal, counters Zach Karabell. I think we’ll look back in years to come and see the investment as significant.
The put buying in Citigroup suggests to me that investors are still looking for downside in Citi, adds Pete Najarian. And keep an eye on the Proshares Ultra Financials . If the financials are near the bottom that might be worth a look.
I expect a vicious reversal, adds Jeff Macke. I’m not bullish but I wouldn’t get short either.
DETROIT'S BAILOUT HITS SPEED BUMP
Further uncertainty over the prospects for a bailout for struggling automakers added to the gloom in Thursday’s market. Democratic leaders warned a bailout bill would not pass unless it included a plan for the industry to return to profitability.
Democratic leaders said automakers can submit another plan by December 2, adding that the proposal could be considered the week of December 8.
Shares of General Motors and Ford were tied to the bailout news, ending higher after falling sharply earlier in the day.
Some of the world's top banks are backing a proposal to develop a mandatory central clearing system for the $55 trillion credit default swap (CDS) market, a report in the Financial Times said on Thursday. Dealer banks are stepping up efforts to back CDS clearing to head off a more radical overhaul, which includes a proposal to move trading of over-the-counter CDS on to an exchange, the report said, citing an internal Morgan Stanley (MS) email.
Credit default swaps, which protect against a debt issuer's default, have been blamed for the worsening financial crisis, and banks fear that they might lose business if regulators insist on an exchange model for trading.
OIL DIPS BELOW $50
Oil prices dropped more than 7 percent to below $50 a barrel on Thursday as a bearish U.S. jobs report intensified concerns of a long and deep global recession and further crushed fuel demand expectations.
The U.S. government reported the number of workers making new claims for jobless benefits surged last week to the highest level in 16 years, helping to push down global equity markets.
The OIH was absolutely decimated on Thursday and that dragged down the market, muses Pete Najarian. Both Chevron and Exxon got clobbered and I still think they have potential to the downside. I'd put on some puts.
If this bubble corrects and oil goes back to a nice stable level it will be the first time in the history of trading that’s happened, says a disgruntled Jeff Macke.
And in the ag space, we’re on the other side of the mountain, he adds China and the emerging market can’t buy all the fertilizer in the world.
So what looks good in the space? Nothing, according to Guy Adami. Don’t buy and hold.
FEDS BALANCE SHEET
In breaking news CNBC's Steve Liesman reports that U.S. banks' direct borrowing from the Federal Reserve at the discount window slipped in the latest week but remained at hefty levels, while the Federal Reserve's presence in the commercial paper market increased.
Banks' overall borrowings averaged $296.82 billion per day in the week ended Nov. 19, versus an average $322.93 billion per day the week before.
The decline in bank borrowings, albeit to still elevated levels, "is another indication that the extraordinarily aggressive expansion of central banks' liquidity operations in October and early November finally got ahead of year-end term funding needs in the banking system," said Lou Crandall, chief economist at Wrightson ICAP, in Jersey City, New Jersey.
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Trader disclosure: On Nov.20, 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); Karabell Owns (AAPL), (C), (CSCO), (GOOG), (JPM), (UYG); Najarian Owns (AXP) Put Spread; Najarian Owns (C) Puts; Najarian Owns (CVX) Put Spread; Najarian Owns (IYR) Puts; Najarian Owns (IYR) Puts; Najarian Owns (SCHW) And Is Short (SCHW) Calls; Macke Owns (SDS), (MSFT), (WMT), (UUP); Macke Is Short (YHOO)
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