Daily Blog -01/15/09- 2:06 P.M.
10% Plunge in Seven Days
The market continues to plunge lower. Thursday's decline marks the longest drop in the market since Lehman Brothers disintegrated back in October 2008. In the last seven days the Dow Jones Industrial Average has fallen more than 1,000 points for a 10% drop. The S&P 500 has decline more than 11.5%. The NASDAQ Composite is off 10.8%. The small cap Russell 2000 index is down almost 14% in the last seven sessions.
Weighing heavily on the market is the financial sector. The BKX banking index is down 6.8% and the BIX is off 8.6%. Two stocks really pulling the major indices lower are BAC and C. Bank of America (BAC) fell from $10.20 to an intraday low of $7.35 (-28%) on news that the U.S. government was using TARP money to help BAC complete its acquisition of Merrill Lynch (MER). The reason given was if the deal failed to close it would undermine the stability of the U.S. markets. BAC is bouncing from 17-year lows and is only down 17% around $8.50 at the moment. For reference the November 2008 low for BAC was $10.01.
Citigroup continues to crash. The stock is off another 10% and trading near $4.00 a share after yesterday's breakdown under the $5.00 mark. Many funds are barred from owning stocks under $5.00 so the selling could continue. The 2008 low for Citigroup was $3.05 and the intraday low today was $3.36. If you're the optimistic type then a rebound from here might look like a bullish double bottom for C. FYI: Both C and BAC are Dow components.
Chart of Citigroup:
Last night Apple Inc. (AAPL) made headlines after announcing that its CEO Steve Jobs was taking a leave of absence through June of this year. Investors have been worried over Jobs' healthy and AAPL's succession plans for months now. This announcement came out last night and after hours trading saw AAPL fall from $85 to $76. Shares opened at $80.57 and are actually bouncing from their lows at $83.00. If you're just looking at the daily chart of AAPL is looks like support is holding near $80.00 (for now).
Checking the OptionInvestor.com play list and I see that Boston Properties (BXP) looks like a winner. Readers should take profits in this put play. We have a secondary target to exit at $42.75. The stock hit $42.76 this morning. I think it's time to exit. Meanwhile European banking giant HSBC (HBC) is off another 5.6% and trading under round-number support at $40.00.
Looking back at the major indices. Broken support at 8400 should now be new resistance for the DJIA. Broken support at 860 will probably be new resistance for the S&P 500.
Chart of DJIA:
Chart of the S&P 500: