Earnings Season

Alcoa kicked off earnings season on Monday night and announced larger than expected losses. It appears there remains a lot of bad news in the pipeline this earnings season. I heard one analyst say the 4th quarter results will be down 20% from last year. The rally that occurred off the November lows occurred at the same time bad news was released. In fact the market continued to rally even when the NFP came out showing the worst unemployment in 26 years. That is a good sign when the markets go up even with bad news. But it appears the markets can only take so much. We have been in a 4th wave from the November lows and 4th waves are choppy. I had expected a retracement back to at least the 38% mark from September highs to November lows as I mentioned in my last post. It would appear now that the market has reached its 4th wave high and is now in the 5th wave headed for a retest of the November lows. Today’s release of the Retail Sales report for December came out at –2.7% more than double the –1.2% analysts expected. The market has tanked on the bad news and with more bad news expected it would appear the market is headed lower. If earnings turn out to be much lower than expected then with a low PE ratio the S&P 500 could be headed to the 600 area. Ouch! This is a trading market and no place to be investing right now. Be sure and use protective stops.