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Daily Blog -03/05/09- 2:38 P.M.


Markets Sink to New Lows

Wednesday's oversold bounce is gone. One again it is the financial sector that is leading the market lower. There was a lot of news out today with the monthly retail same-store numbers. Plus, some historic news out of England. Asian markets were mixed. The Chinese Shanghai index managed another 1% gain on top of yesterday's 6% surge. The Hong Kong Hang Seng was down about 0.9%. The Japanese NIKKEI rallied almost 2%. European markets fared a lot worse. The French CAC 40 lost almost 4%. The German DAX fell 5%. The English FTSE dropped 3.1%.

The European Central Bank slashed interest rates half a point from 2% to 1.5% as they try to cope with their own struggling economy. Meanwhile the Bank of England is doing almost everything in its power to prevent Britain's economy from falling into a deflationary spiral. The Bank of England has decided to begin their own quantitative easing policy with plans to buy up government debt and run the printing press for its currency. The BoE also cut its lending rate from 1% to 0.5%, which is the lowest level in the bank's 315-year history.

Speaking of banks, J.P.Morgan analysts released a report out today with their opinion that major European banks with exposure to struggling Eastern Europe might require another $50 billion in additional capital in the next 12 to 24 months. Meanwhile the banking sectors here in the U.S. don't look much better. The BKX banking index is down 10% and breaking "support" at the 20.00 level marking new all-time lows. The BIX banking index is down 11.7% and breaking down under the 50.00 mark hitting historic lows. Two years ago this index was over 400. Citigroup (C) made headlines today when its stock fell under $1.00 for the first time ever. Shares hit $0.97 intraday and are currently down 9.7% at $1.02. Bank of America (BAC) is off 10.5% and trading at $3.20 a share. Wells Fargo (WFC) his hitting 1995 levels near $8.00 a share (-15%).

Chart of Citigroup:

Retail Sales

Thursday brought the February same-store sales numbers for a wide range of retailers. Economists were expecting total same-store sales to fall 2% but the figures actually came in flat, a big win for the retailers in this economy but no one seemed enthusiastic about the news. Wal-Mart (WMT) was the big winner. Without WMT's 5.1% jump in same-store sales the entire sector's results would have fallen 4.1%. Right now consumers are pinching pennies so it makes sense seeing WMT pick up market shares and additional business. The Dow-component and retail titan said it would increase its dividend by 15%. Shares of WMT are up 2.4% but the rally appears to be failing near its descending 50-dma. The RLX retail index is off 3.2% and slipping to new three-month lows.

In other news carmaker General Motors (GM) fell another 17% to $1.82 after the company's auditors said they have serious doubts that the company will make it without filing for bankruptcy.

As stocks sink investors are fleeing back into gold. The GLD is up 2.6% as it bounces from the bottom of its bullish channel.

Chart of GLD gold ETF:

Trading Updates

Scanning the OptionInvestor.com play list I see that AMZN is showing some relative strength. The stock is up 0.1% and looks like it's coiling for a bullish breakout higher but for now resistance near its 200-dma and its trendline of lower highs is holding. We're still waiting for AMZN to hit our trigger point. Baidu.com (BIDU) is up another 2.8% and hit an intraday high of $164.92. The GLD hit our alternative entry point to buy calls at $90.65 this morning. That means we're using a stop loss under Wednesday's low. Our bullish play on the SH, an inverse ETF on the S&P 500, is up another 4% today. Readers may want to think about raising their stops on the SH.

Scanning the OptionInvestor put plays we see that AAPL fell 2.3% after rebounding toward resistance yesterday. The weakness in financials is rubbing off on BLK with the stock down 4% to $92.43. I could kick myself for not launching new put positions in Goldman Sachs (GS) Yesterday but the safer bet seemed to be waiting for a new relative low. GS is down 5% to $81.00 and our suggested trigger is $79.00.

Let's look at the PremierInvestor plays. The bounce in the IYM is fading. I think readers might want to exit early. The QLD is off almost 5% but we're still waiting for a dip near $20.00 as our entry point for a real bounce. Our bullish play in silver with the SLV is up 1.9% to $13.02. The next challenge for SLV will be its 200-dma and possible resistance at $13.50. I think our bearish play on ARLP might see more success soon. Shares of this coal miner are coiling for what should be a bearish breakdown.

Here's a quick look at today's charts for the major indices:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:




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