Time to Sit and Wait
Market Update: 2009-03-05
Just a quick update. We are definitely testing support on the S&P 500 now, and if we don't rebound soon then we will have broken support. The government has yet to have the FDIC take Citigroup and Bank of America, and the administration's unwillingness to do what is necessary in a timely manner is really upsetting the markets. Citigroup is now a penny stock, trading under $1.00/share!
The issue is that JP Morgan, Wells Fargo and other banks that were relatively healthy compared to the Citigroup and Bank of America are now tanking as well because there cannot be any certainty or confidence in our banking system until the U.S. government does something about the bad banks. And as I have said before, anything less than a full FDIC takeover of Citigroup and Bank of America is, in my opinion, not likely going to work. I think the market has proven that since Citigroup begged the government to take a 36% stake in their bank last Friday and the stock has cratered since the government agreed. There can be no confidence in a financial system that is propped up by taxpayer dollars without the taxpayers having full control of what it is they are propping up. And the bad thing is that by the government picking favorites, like Citigroup, to pour money into, it then make the healthly banks lose value and their ability to raise capital because they are not favored. It is crazy!
My best guess is that the market is breaking support, so major selling may continue for a while before we get any meaningful rebound. Also, when we do get a rebound, the old support of 752-778 level on the S&P 500 will become a resistance level. So it will be very interesting to see if we can get back above that resistance.
As of right now, the S&P 500 is trading at 688. That puts it 8.5% below the November 2008 support level of 752, and 11.6% below the October 2002 support level of 778. Either way you slice it, it is not encouraging. If we are going to hold support we need to rally very soon or else we could be looking at 600 or lower in the blink of an eye.
Bottom line, something must be done about Citigroup and Bank of America ASAP, or else our portfolios will continue to tank. For now, I am not buying any more shares of anything, as I want this market to show me an attempt to make a bottom before I commit any more money. Sitting on the sidelines is what I am doing for now.
We will know more later. Until then, Happy Investing!
Gregory Guest
Just a quick update. We are definitely testing support on the S&P 500 now, and if we don't rebound soon then we will have broken support. The government has yet to have the FDIC take Citigroup and Bank of America, and the administration's unwillingness to do what is necessary in a timely manner is really upsetting the markets. Citigroup is now a penny stock, trading under $1.00/share!
The issue is that JP Morgan, Wells Fargo and other banks that were relatively healthy compared to the Citigroup and Bank of America are now tanking as well because there cannot be any certainty or confidence in our banking system until the U.S. government does something about the bad banks. And as I have said before, anything less than a full FDIC takeover of Citigroup and Bank of America is, in my opinion, not likely going to work. I think the market has proven that since Citigroup begged the government to take a 36% stake in their bank last Friday and the stock has cratered since the government agreed. There can be no confidence in a financial system that is propped up by taxpayer dollars without the taxpayers having full control of what it is they are propping up. And the bad thing is that by the government picking favorites, like Citigroup, to pour money into, it then make the healthly banks lose value and their ability to raise capital because they are not favored. It is crazy!
My best guess is that the market is breaking support, so major selling may continue for a while before we get any meaningful rebound. Also, when we do get a rebound, the old support of 752-778 level on the S&P 500 will become a resistance level. So it will be very interesting to see if we can get back above that resistance.
As of right now, the S&P 500 is trading at 688. That puts it 8.5% below the November 2008 support level of 752, and 11.6% below the October 2002 support level of 778. Either way you slice it, it is not encouraging. If we are going to hold support we need to rally very soon or else we could be looking at 600 or lower in the blink of an eye.
Bottom line, something must be done about Citigroup and Bank of America ASAP, or else our portfolios will continue to tank. For now, I am not buying any more shares of anything, as I want this market to show me an attempt to make a bottom before I commit any more money. Sitting on the sidelines is what I am doing for now.
We will know more later. Until then, Happy Investing!
Gregory Guest
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