The Struggle Continues

January 31, 2008

Today started on a down note, as the indices looked to begin over 1% down. MBIA had an undesirable earnings report, along with more follow through on yesterday’s reaction to the Fed’s rate cut. Also the weekly jobless claim report came in higher than expected. However once the market opened, it was all uphill. The dip-buyers jumped in, and pushed the market higher on the day. Near the closing, the markets sold off on news that the S&P had downgraded a handful of bond insurers. However, the markets were still able to close near their highs as the major indices all closed over 1.5%. A great day for the bulls to say the least. Unfortunately, after the bell, it didn’t take long for the market to remind us why we are in this ugly mess to begin with, as Google issued its quarterly earnings report, and there was a miss on the profit and what expectations were heading into it. To say the least, this makes for an interesting open tomorrow.

While GOOG sold off hard in after-hours trading (about 6.5%), we aren’t entirely convinced that this type of sell-off will hold. The possibility exists that it rallies off of the lows and actually finishes in the green. We don’t consider this to be a likelihood, just a possibility. If it does happen, we should see another exciting day in the markets.

Tough to get a read on this market, and we don’t believe we are out of the woods, in this bear market we are currently in. We will need some aggressive and consistent action on part of the bulls to show us that the market is finally turning direction. We continue to urge capital preservation to our readers.

Let’s review the charts…

The action by the NASDAQ was without a doubt positive, but going into tomorrow, Google’s earnings will weigh heavily on the market, and unless it is able to rally off of its lows, this could be the impetus that gives a day-long headache for the bulls. Also, the price action failed once again to close above the August lows. This area is becoming a major stumbling block for the market.

A good overall day for the market as the S&P was able to rally strong after a dismal open. The volume was about the same as yesterday’s, but continues to trade within a downward sloping channel.