EQUITIES COLLAPSE THROUGH SUPPORT LEVELS ON BLEAK EARNINGS OUTLOOK, FALLING COMMODITY PRICES.
US Equities fell through significant support levels as the markets prepare to experience EARNINGSPALOOZA!! Expectations could hardly be any lower as today's price action demonstrated. S&P futures were the biggest losers this session & traded through some significant support levels as commodity based & financial stocks led the markets significantly lower. The first major report came from Alcoa, the largest aluminum producer in the US. The company did not disappoint with regards to the dismal nature of its quarterly economic results. It reported its first quarterly net loss in six years on declines in prices and demand for the metal. The report of 28 cents per share loss capped off a week of bleak & aggressive announcements from the company regarding jobs & economic landscape. The company was one of the worst performing stocks in the Dow for 2008.
Commodity based & financial stocks came under the most pressure in this session. Citigroup fell 17% as its plans to merge its brokerage arm with Morgan Stanley heightened concerns regarding future earnings (So much for the one stop financial shopping model.). Conoco Philips fell heavily today as crude oil fell nearly 7 % on perceptions of continued falling demand despite cuts by OPEC. Estimates of a drop of nearly 1 million barrels of crude per day prompted Goldman Sachs to speculate that the market will likely see a $30.00 price for oil sometime in the 1st quarter of 2009. The VIX (volatility index) climbed in today's session, suggesting that traders should prepare for a wilder ride than they have seen in the past weeks. What traders & investors will try to decipher now is how much of this bad news has been priced into the markets already. This could lead to some significant near term spikes in equity prices on value hunting for maintainable dividend income and value.
Technically, March Dow futures settled near the lower end of their recent channel. Further downward movement should find support near the 8150, with net level of support at 8090. If support holds, market should bounce from this level back up to 8530. Look for possible upward breakout level around 8780.