Market Falls for Fifth Consecutive Day

Tuesday, March 03, 2009

Fundamental Take:
The Dow fell 37 point today after yesterday's 300-point drubbing. Bernanke continued testimony before the Senate Banking Committee stating that recovery is dependent on the government's ability to stabilize the financial sector. He also admitted to experiencing outright anger towards executives at American International Group identifying the company as an unregulated hedge fund attached to a stable insurance company. He believes executives "exploited a huge gap in the regulatory system" to make "huge numbers of irresponsible bets". General Electric continues to trade as if it is going bankrupt falling nearly 10% today closing at $6.87. Investors are fleeing this stock as worries about losses in the finance division mount.

Technical Take:
The inability to bounce after a 300-point fall is disheartening with the market falling for the fifth consecutive day. Pessimism reigns supreme as investors just cannot find a reason to buy. Our economic future is as uncertain as ever dashing hopes for a fundamental case and the technical landscape has broken down now also indicating lower prices. Technicals were, for four months, the only case to be made for buying stocks as we were basing and the panic selling had abated. Now, we have taken out lows and stocks are deteriorating in another leg lower. It is amazing to see what a lack of transparency can do to a market. The inability to interpret bank balance sheets has caused fear to overwhelm and the government just cannot throw enough money at the problem. Technically, I will be looking for a short-term bounce in the indexes tomorrow or Thursday as we have five days down in a row now. The selling should relieve within a day or two and a nice, short-covering rally may ensue.


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