Lets start at the end of the day today and work our way back. After hours the markets got one “ouch” after another. There have been many people saying that the markets will hinge on how good (or not so good) earnings come in this earnings season. Well the earnings season is just getting underway and tonight after the market closed we got a handful of earnings that were like one bee sting after another.
ISLN gave an earnings warning and guided lower for the quarter, CSCD lowered EPS and guides lower, SMOD missed by a penny on their EPS, MEDE announced much lower revenues for the Q3, RNIN lowers 2007 sales guidance, BMS lowers Q3 guidance by substantial amount (says they are seeing lower demand for their packaging products), NZT reiterates their core earnings to fall 5% to 8% in FY08, NTRI misses big time on their earnings- stock had to be halted for their earnings. One it started trading it took a huge hit to the downside. WTSLA lowers guidance, and the once aspiring speculatative stock play TOA issued this today:
“Co announces that it has withdrawn all guidance related to 2007 and 2008 due to worsening market conditions impacting the new home industry. “Conditions in all of our markets weakened more than we anticipated due to a number of factors including: recent severe liquidity challenges in the credit and mortgage markets, diminished consumer confidence, increased home inventories and foreclosures, and downward pressure on home prices. All of these factors have contributed to lower gross sales and higher cancellation rates,” said Antonio B. Mon, President and Chief Executive Officer. The Company does not anticipate providing further guidance in the near future”
There were a few earnings reports that came in that were OK but the majority tonight was bad news. Not all of these companies are big but that does not matter here. What matters is if this will be a trend or not. This earnings season is when we begin to see how companies are (and have been) impacted by the credit crisis and other economic conditions which have been worsening. Earnings will move the markets if we get a lot of negative news from the companies as they report.
Also after the markets closed Business Objects (BOBJ) was downgraded.
Earlier in the day big name stock Advanced Micro Devices, Intel, and Nvidia were downgraded by Morgan Stanley on the downgraded on ‘inventory corrections’ (we read that as too much inventory, not enough buyers).
So while tech is being pumped, pushed, and touted as where everybody needs to be getting in the tech sectors continue to weaken. We have been watching the charts and if you recall we posted a recently on the tech sector (SOX) and noted that it would not be a buy unless it was able to move above resistance. Tech has the appearance of forming an inverse head and shoulders pattern which is a classic technical indication of much lower prices coming. We will keep watching this.
Last night I addressed the issue of consolidation. Today’s action in the markets is part of that consolidation. What happens after it consolidates will give us a strong clue on our future direction. Don’t be so sure the markets will always go up. Thinking markets only have one way to go is not trading on logic but on emotion. This is why you will be winners in the end here with us. We don’t play on emotions and hype, but on sound technical and fundamental reasons.
The famous big money investor Carl Ichann said a recently that the markets are “dangerous” now. And we could not agree more. There have been some very good daytrades recently and we are working on getting our real time system up and running so that you can join us in a ‘live’ setting. When we see good swing trade setups (long or short) we will be posting them. With the market in consolidation and hinging on more economic news we can’t say which direction we are going in here.
