Earnings and Fed Minutes Hit The Market.......
We are going through a rough period here with regards to earnings these days. A few months back we had Chambers, head of Cisco Systems, Inc. (CSCO) say the economy fell off a cliff. Many criticized him, saying it was just his bad leadership that was causing their problems. They were wrong. He was right. The economy did fall off a cliff. Now we're seeing the fallout as there are a lot of companies warning. More than we've seen in quite some time. The scary part is the size of the warnings. Not what they just reported but their future guidance.
They are lowering their guidance by quite a large percentage. More than anyone thought possible. Double digit warnings are coming from some very large leaders. Those with exposure globally are paying the biggest price in terms of the size of those warnings. Those with exposure only to the United States are suffering less, but still suffering some. So many stocks with global exposure in their own bear markets, such as Cummins Inc. (CMI) and Caterpillar Inc. (CAT), to name a few. With all the problems from overseas they are hitting our economy now in a big way, and thus, taking the earnings with it. Let's face it folks, in the end it's only about how earnings do that decides the direction bigger picture of our stock market. If they are on the rise we rise, and if they are on the fall we fall. It's as simple as that. Whatever news is out there is ultimately judged upon how it affects earnings. Right now, the future for earnings isn't very bright. How far down the road is unknown, but the short-term isn't very bright.
If we study our chart patterns off the June lows, we see that we are more or less in the middle of things. A drop closer to the top of the range, but overall, right around the middle. We still have a gap and the 200-day exponential moving average to protect, but we did lose the 20- and 50-day exponential moving averages today along with a gap top at 2895. It’s not great action for the bulls to lose those levels, but they haven't broken by very much at all. Not yet anyway. Neither side is one hundred percent in control, but we have been down five straight days ,and some of the 60-minute charts are getting fairly compressed on their oscillators. We could bounce at any time, but you shouldn’t expect too much to the up side. We'd need genuine good news for that to take place. Where that may come from is anyone's guess. When charts look as they do now, the very best thing you can do for yourself is to keep things light and not over play. The more positions you have the harder it is to get good results. A lot of cash is appropriate. It doesn't mean you have to be cash all the time, but holding a lot of it most of the time makes the most sense in this type of environment.
If Mr. Bernanke were to come out tomorrow morning and tell the world he's taking away any possibility of QE3, this market would be halted at the open. It would fall 4 digits worth. Maybe many of them because, let's be honest folks, we're in recession here let alone the rest of the world. If Fed Bernanke said he's not protecting the markets we would crash out. The problem for everyone is that would be too easy. He will never do that as he plays Main Street through Wall Street, and thus, will pump away at will whenever he feels the need to do so. The bears always have to fear the grim pumper, while the bulls have to fear recession and poor earnings. A bear market environment with the bulls having the big defender on its side. Makes things tough for everyone and that won't be going away any time soon.
2860 Nasdaq 100 is the bottom of the gap. Good support there. Back and forth we go with the bears holding the slight edge, but nothing in terms of the bigger picture at this point in time. That can certainly happen but it hasn't yet.