The Dow Drops to a New Low
Feb 20, 2009
Posted by Jody Eisenman | Filed under Uncategorized
As I wrote two days ago (“A Short Technical Analysis Primer”), the fear was that if the market closed below its’ technical support, it could drop rapidly. The DJIA closed today at 7466, the lowest level since October 2002. It is now down about 15% for the year, and the year is not even two months old! The financial stocks continue to get destroyed. Citi closed at 2.51. If you feel adventurous, you can buy 5 year Citi paper that will yield over 10%. The trick is that Citi has to stay alive long enough for you to collect. Right now, the CDS on Citi are at 410 basis points, which means that you would pay over 4%/year to “insure” against default. Bank of America closed at 3.93. It seems like ages ago, but the stock actually traded in the mid 30s in early October. Even among the non-financials, there was heavy selling. Alcoa closed at 8.50 last Monday. It closed today at 6.35, or a drop of over 25%. 283 stocks hit new 52 week lows today. Prominent names include Ashland (6.42), American Express (12.87), Caterpillar (26.86), and Dupont (20.75). There doesn’t seem to be much pockets of support anywhere. About the only positive thing I can say is that I can’t find anyone who is bullish anymore. Everyone seems to think that it’s a foregone conclusion that the market is going to continue to fall. Generally speaking, when you see that, it could be a sign of capitulation, and the market rallies. However, I have no idea what economic event will actually trigger some real buying here. Lets hope for the best.
