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Daily Blog -01/07/09- 2:30 P.M.

Stocks Sink on Job Loss Fears

The major averages are trading at their lows for the day as the market experiences a widespread sell-off. Not one sector index is trading higher as investors react to dour economic news. The ADP employment index came out this morning and showed a loss of 693,000 jobs in December. The government's own non-farm payrolls report is due this Friday morning and today's ADP number casts an ugly shadow on what Friday's report might tell us. Raising concerns was a prediction from the Congressional Budget Office, which is forecasting unemployment to surpass 9% in early 2010.

Adding more fuel to the fire was some sour corporate news from the likes of Alcoa and Intel. Both companies are Dow components and both report earnings next week. Last night Alcoa (AA) announced that they were slashing jobs by 13,500 and closing plants to save cash. This morning Intel disclosed that fourth quarter revenues would likely drop 23% to $8.2 billion.

Here's a quick glance at some of the market's worst sectors today:

Oil ETF (USO) ....... -10.7%
Gold & Silver (XAU).. -6.8%
Casinos (DJUSCA)..... -5.6%
Home Construction ... -5.7%
Railroads (DJUSRR)... -5.9%
Oil Services (OSX)... -5.6%
Broker-dealers (XBD). -5.3%
Semiconductors (SOX). -5.0%
Natural Gas (XNG) ... -4.7%
Insurance (IUX) ..... -4.5%
Oil index (OIX) ..... -4.2%
Cyclicals (CYC) ..... -4.3%
Transports (TRAN) ... -4.0%
Banking index (BKX).. -3.8%

It you look at the rally that began on December 29th you can see that stocks went almost straight up. The last couple of days has seen momentum fade so it's no surprise that traders are taking profits on a bad news day. However it might be worth noting that both the DJIA and the S&P 500 have already broken down past the 38.2% Fibonacci retracement of this rally. The NASDAQ Composite is flirting with a breakdown under the same 38.2% pull back and round-number support at the 1600 mark.

If you have a bullish bias for stocks then look for the pull back to bounce at the 50% or 61.8% Fib retracement of the rally.

Intraday Chart of the NASDAQ:

Intraday Chart of the S&P 500:

Intraday Chart of the Transportation Index:

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