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Daily Blog -01/23/09- 2:52 P.M.

Another Bounce from the Lows

Another day, another triple-digit move in the Dow Industrials. The market continues to see big intraday swings. The bulls are trying to defend stocks in the 7900-8000 zone. This morning's weakness was influenced by European markets.

Banks and insurance stocks in Europe continued to sink on Friday dragging the major averages down with them. This led to another down day for many American firms at the open. The DJIA slipped to a new relative low at 7909 before bouncing. The S&P 500 fell to 806. The NASDAQ also spiked down to a new relative low of 1434 at the open.

Fortunately, the U.S. indices are bouncing. It looks like the insurance stocks are actually leading the way. Yesterday Aflac (AFL) tumbled sharply on worries that the company might have huge investment losses tied to failing European financial firms. AFL came out today with positive comments telling the market they don't need new capital, they plan to keep their dividend, and that earnings will be inline with estimates. ALF is currently up 15% at $26.40. Their positive outlook is lifting many of its peers. HIG is up 15% and producing a bullish engulfing candlestick pattern. LNC is up 9% with its own bullish engulfing candlestick. PRU is up 7.7% and bouncing for the third time in a row from the $21.50 level. XL is up 13%.

One financial firm that continues to sink and hit ten-year lows today is Capital One Financial (COF), the credit card firm. COF reported earnings last night and delivered a massive miss. Analysts were expecting COF to actually earn a profit of 33 cents a share. The company reported a loss of $1.59. That's almost $2.00 worse than expected. Many analysts have downgraded or cut their estimates on the company due to rising unemployment in the U.S. Shares of COF were down 23% at their worst levels but have recovered to a -10%.

In other earnings news semiconductor maker AMD reported last night and missed estimates by 14 cents. The stock gapped own this morning and $1.86 (-7.9%) but shares have recovered and a currently up 3.4%. Internet search giant Google (GOOG) reported earnings last night and beat estimates by 15 cents. The stock spiked higher this morning and have gone almost straight up. GOOG is currently +7.6% near $330. American motorcycle legend Harley Davidson (HOG) reported earnings this morning and missed by 23 cents. That shouldn't be a surprise given the economic slow down and failing U.S. consumer. The stock spiked down to $10.07 (-18%) but has recovered to a -5% decline. Office solutions company Xerox (XRX) reported earnings this morning and missed estimates. Management then guided earnings lower for the first quarter. The stock plunged 20% to $6.05 this morning but has bounced back sharply to $7.00 (-7.7%).

Crude oil is also in rebound mode. Oil was weak first thing this morning but in the last few hours the commodity has gone almost straight up. The commodity is up 6% and back above $46 a barrel. The USO oil ETF is up 7.7% at $32.35. This is giving the energy stocks a boost. The OIX is up 1.6% while the more volatile oil service index is up 7.1%.

Oil wasn't the only commodity in rally mode. Gold was surging toward $900 an ounce. The February futures gold contract added $37 and closed at $895. The intraday high was $903/ounce. Gold was a big performer for the week with a 7% gain. The GLD gold ETF lagged behind the commodity and only hit $88.94 intraday. However, this is a big bullish breakout in gold. There are a lot of investors that have been watching and waiting for gold to break this level of resistance and it could see a sustainable rally of the next few weeks.

Chart of gold (GLD) ETF:

Looking at the major averages this afternoon it is encouraging to see the big bounce off its lows but unfortunately we are still facing a bearish trend of lower highs. The DJIA, S&P 500, and the NASDAQ have all produced bearish patterns of lower highs and lower lows this week. You could argue that the downward move is quickly losing momentum but until the trend changes bears are still in control.

Chart of the DJIA:

Chart of the NASDAQ:

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