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Daily Blog -01/12/09- 3:10 P.M.


Stocks Sink on Earnings News

Stocks are struggling as we step into the second full week of January. The Dow Jones Industrial Average is marking its fourth decline in a row. The tone on the street was apprehensive as investors look for earnings season to begin tonight.

Dow-component Alcoa (AA) reports after the bell this evening. The company already announced cut backs last week and the stock was downgraded to a "sell" this morning. AA was off more than 8% and trading under the $10.00 mark. Currently analysts are looking for AA to report a loss of 10 cents a share.

Citigroup (C), another Dow-component, was really weighing on the market today. The stock is down more than 16% and trading near $5.65 at six-week lows. Citigroup is leading the financial sector lower with the banking indices down between 4% and 5% and the broker-dealers off 4.6%.

We're starting to hear the "D" word again, deflation. Investors are worried as commodities prices sink. Gold prices fell sharply, off more than $33 to $822 an ounce. The GLD lost 4% and testing round-number support at $80.00 and technical support at its 100-dma. Oil prices were also sharply lower with the front month crude futures down 6% to under $38.00 a barrel. Traders remember the painful expiration last month and we're quickly approaching futures expiration again on January 20th.

A quick look at the OptionInvestor play list shows that most of our bullish plays are being stopped out but we raised our stop losses recently in anticipation of further declines. AvalonBay (AVB), a put play, has hit our first target at $51.00. BXP, another REIT, almost hit our first target at $47.75. Toyota (TM), another put play, has fallen under its 50-dma and testing the $65.00 level.

Currently the DJIA is off 163 points at 8435. The 8380-8400 level might be support. The NASDAQ composite is down 37 points at 1535 and falling under technical support at its 50-dma. The next level of support for the NASDAQ appears to be the 1500-1490 zone. The S&P 500 index is down more than 22 points at 867.50 and also plunging through all its significant moving averages. The next level of potential support for the S&P 500 looks like the 860-857 region.



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