03/02/2009

Stocks around the globe are lower on fears that the recession is getting worse.
Last Friday, US Stocks closed February with their worst performance since 1933.
The S&P 500 dropped 10.9%, and has dropped 18.6% so far this year, the worst
start to the year on record. And Stocks are getting no relief at the moment as the
Dow trades below 7,000 for the first time since 1997.
Also pressuring Stocks lower is news that insurance giant AIG International is set to
receive another lifeline from Uncle Sam to the tune of $30B after losing $61.7B in
the 4th quarter of 2008...a record loss for a US company. Think about that. Losing
$61B is like losing almost 1 Billion dollars a day for every business day during the
quarter...or $125 Million per hour. Scary. And speaking of scary - Stock investors
are clearly worried as to how far prices will drop before reaching a bottom. There
have been many technical support levels that have been violated. Our charts show
that the next floor of support is at 716 on the S&P, which was tested today - that
floor goes back to December of 1996. Let's hope that level can hold.
With Stocks in the doldrums, you'd think Bonds would be off to the races. But that's
not the case as Bonds can muster only modest gains as they continue to trade
sideways, capped by both the 25 and 50-day Moving Averages. Bond Traders are
certainly aware that Stocks are due for a major relief rally...and when that happens,
Bonds will be sold off a bit. So the smart play for those Bond Traders is to not get
too long ahead of the inevitable Stock reversal. Bonds are near unchanged on the
day and are already well off the best levels seen earlier in the session. We can
Float carefully here, but don't be surprised if you get a Lock Alert, should Stocks
finally reverse higher.
In other news, households are hoarding their cash...in January, the Personal
Savings Rate rose to a 5% annual rate, a 15-year high. January Personal
Spending also rose to 0.6% versus estimates of 0.4%, while Personal Income rose
0.4%, higher than estimates of -0.2%.