Market Tumbles Below 7,000

Monday, March 02, 2009

Fundamental Take:
Monday morning started with an extremely negative tone as American International Group (AIG) reported a $61.7 billion loss for the fourth quarter putting total 2008 losses at $99 billion. AIG's disappointing earnings report, along with other discouraging economic reports, led to a 300-point fall in the Dow Jones Index. General Electric continues to tumble lower losing over 10% today after cutting its dividend 68% last Friday now trading below $8 for the first time since 1994. Financials led the way lower as has been the case the entire year losing 6% on the day. Investors simply cannot find a reason to own financial companies as the balance sheets lack transparency and the worry over government intervention wiping out common equity is all too real. Witnessing Citigroup fall to a low of $1.15 today certainly does not inspire confidence in shares of Bank of America or JP Morgan as they lost 8% and 7%, respectively.

Technical Take:
Friday represented a major technical breakdown in the indexes as the S&P 500 closed at new lows for the year. The Dow gapped below the psychological 7,000-level closing at 6,763. The S&P 500 flirted with the psychological 700 level closing slighly above after breaking for a short time. The market is deteriorating as hopes of the 4-month rangebound base representing the final bottom fall apart. The selling is systematic and organized, not panicked like late last year indicating a likelihood of further downside. Depression and complete despondancy are beginning to set in as even the best investors watch their stocks crumble under the weight of an angry bear.


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