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MV Weather Report: Insurers Get Hit By Tornado?


Rain or shine, we review the day's biggest stock stories.

The story of the day was Citigroup (C): The government decided it would take a bigger stake in the company. The government also said it would make significant changes to Citi's board.

The market didn't like the news, sending the S&P down 2.25% in the pre-market. When the market opened, the S&P hit a new intraday low of 734. Stocks quickly reversed, and it looked as if a rally was underway.

But the bears got the best in the end: A late day sell-off closed the S&P at 735. The most likely reason for the early morning whoosh was that most traders set stops that got triggered once the 741 low was taken out.

Kevin Depew uses the TD technical analysis to explain this morning's sell-off:

"There are a couple of things to consider going forward. Remember, perfected buy setups typically produce a 1-4 bar (month, in this case) reaction before the trend resumes. Meanwhile, although the S&P 500 TD Absolute Retracement level of 777 has not been qualified as a break, yet, if it does then the next level down is 593, as seen in this chart.

"A couple of other items worthy of mentioning. Tom DeMark has noted two analogs currently running with similarity to March 25-27, 1980 and October 16-20, 1987, with deeper concern that this time the situation is more global, with many indices positioned similarly, as we noted yesterday."

"For the S&P 500 the 1980 analog expires midweek next week, while the 1987 analog will expire at the end of next week. Otherwise, a close for SPH9 above the close four bars ago, followed by a higher high, would be sufficient to interrupt the analogs, should that transpire.

"The bottom line is to remember that the buy setup we are currently working on is a monthly buy setup and monthly bars can have extreme ranges and take (obviously) many weeks to unfold in a positive manner. Do not base short-term trades on long-term monthly charts, just as you would not base longer-term positions on hourly or 30 minute charts."

The market is obviously at a critical juncture. It will be interesting to see how it plays out next week with AIG (AIG), the banks (Is Bank of America (BAC) next?), and in Washington.

Here's what Bennet Sedacca believes will be the next crisis:

"The problem with the banks is clearly becoming more and more known.

"But what bothers me the most now is the life-insurance industry. After the close last night, S&P downgraded the ratings on the 10 largest life insurers including Prudential (PRU), MetLife (MET) and Hartford Financial Services (HIG)."

Times are rough. Keep your head up and have a great weekend, Minyans!
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