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Major market indices look to end six session losing streak with Big Blue leading the way. Stocks have moved higher in early trading Thursday with the Dow ($INDU) up more than 100 points. However, we have seen triple digit swings in the matter of minutes this past week, so there are no guarantees stocks will end with gains. Earnings news has been a key part of strength with IBM (IBM) exceeding expectations.

Today is the one year anniversary of highs hit on the Dow and S&P 500 ($SPX) at 14,164 and 1,565. This means that these two indices are down both down about 36 percent from these highs. Though the Nasdaq ($COMPQ) is also down this same amount the past year, this tech laden index has never recovered from its highs hit during the Internet bubble near 5,000. However, tech stocks are providing strength Thursday led by IBM.

IBM shares are up more than three percent in early trading after the company announced better than expected earnings. The company reported profit growth of 22 percent to $2.05 a share, 3-cents better than estimates. Maybe even more importantly, IBM reaffirmed its 2008 outlook, easing the Chicken Little cry that “the sky is falling.” Even so, IBM shares were trading at a 52-week low Wednesday and at $95, the stock is well below its 52-week high at $131. Other tech stocks seeing solid gains include Apple (AAPL); up 5 percent and Microsoft (MSFT); rising 3 percent.

AIG (AIG) shares are getting hit again with the insurer down nearly 12 percent. The company announced it could get $38 billion more in funding under a new program announced by the Fed. This is on top of the $85 billion the company got in September. Shares of Wachovia (WB) are down as well on reports that the government is pushing Citigroup (C) and Wells Fargo (WFC) to reach an agreement on splitting Wachovia’s assets. WB was trading near $7; the buyout price offered by Wells Fargo, but now is trading below $5. WFC is also lower, losing nearly 7 percent.

Stocks failed to see strength following the coordinated rate cut by the Fed and several other central banks across the globe. Today, there are reports that the Treasury is looking at taking ownership in many banks to help restore confidence in the banking system. Traders normally do not like the government getting too involved in the financial markets, but the deal would see the purchase of preferred stock without voting rights.

We’ll have to see if stocks can find strength Thursday after such large declines this week. However, we are heading into a three-day weekend with the markets closed on Monday for Columbus Day and traders might not want to take the chance of holding stocks on the long side when anything could happen over the weekend.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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