Why Bob Pisani Nearly Wet Himself on the NYSE Floor
By Jeff Clark
March 11 , 2008
The talking heads at CNBC were all abuzz last week.
"The biggest four-day slide since January 22," they said. "Stocks are at risk of violating the January lows."
It wasn't quite a panic. We didn't see Joe Kernen or Maria Bartiromo banging their heads on the anchor desk – that move is apparently reserved for Jim Cramer. But the talking heads were clearly depressed.
In fact, I haven't seen them this depressed since January 22. I know because I keep a daily journal of what goes on in the stock market, and this is part of what I wrote on January 22, 2008...
"Everyone is depressed. I had 14 messages on my home answering machine (no one ever calls me at home) – friends and relatives all calling just to say 'Hi' and 'By the way, what do you think of the stock market?' There's nothing but bears on CNBC. Heck, even that guy on the floor of the CBOE who wears the 'GOP' badge sounded depressed. He's ALWAYS bullish. So if that isn't a sign of a short-term bottom, then I don't know what is."
The most interesting point from last week, though, is no one on CNBC was talking about what happened right after January 22. The market rallied.
Actually, it wasn't so much a rally as it was an explosion to the upside. The S&P 500 jumped 85 points in eight trading days.
Of course, that's the nature of bear-market rallies. Stocks go from horribly depressed conditions right into upside explosions. And the same thing happens to CNBC anchors. In fact, here's part of what I wrote at the end of the day on February 1...
"All is right with the world again. Stocks are up – huge gains over the past week. Kudlow and the gang [referring to Larry Kudlow and the analysts who appear on his show] are once again talking about the 'greatest story never told.' And I swear Bob Pisani nearly wet himself on the floor of the NYSE as the S&P flirted with the 1,400 level."
The point to all of this is... even though stocks are in a bear market and are headed lower over time, the market is sufficiently oversold – and CNBC anchors are sufficiently depressed – to afford some sort of relief rally.
If you take a look at the following chart of the S&P 500 plotted against its 20-day exponential moving average, you'll see what I mean...
The S&P 500 rarely strays more than 30 points above or below the magnetic pull of the 20-day EMA. When the average drifts too far away, then traders can bet on a reversal. Right now, the S&P 500 is almost 55 points below the 20-day EMA. So it needs to close that gap, and the odds are it will do it by rallying sharply over the next week or two.
At least, that's how I'm going to play it.
I'll continue to watch CNBC, however. After all, in two weeks – when the anchors are giddy and laughing about how the market has rallied and how the worst is behind us – then I'll know it's time to sell.
Best regards and good trading,
Jeff Clark
