Earnings Season

by Larry Levin

There seems to be a sickness in the market lately: fairly low volume and two-sided trading. Today was nearly a replica of Friday - a mixed performance by the end of the day - with many investors apparently waiting on the sidelines for quarterly profit reports.

The early rally was all about WaMu. Rumors have it that Washington Mutual is about to secure a $5-billion "pay-day-loan" to keep operations afloat. That was enough to spike stocks to new weekly highs before a bought of selling overtook the buyers. But since this potential deal was not arranged by the government like MBIA/AMBAK/BSC...it may not come through in the end. What then?

But this week, attention certainly turns to earnings starting with Alcoa, which fell 4% today before it released earnings after the close. The report wasn't positive. The giant aluminum producer posted a drop in profit amid poor demand from top industrial customers, surging energy costs and a weak U.S. dollar. Ummm, I thought the WEAK dollar was good for global US corporations. That's what we always hear...the very reason we're told to ignore the rout in the dollar.

Alcoa handed in a first-quarter profit of $303 million, or 37 cents a share, down from $632 million or 75 cents a share, in the same period a year ago. That's a 50% drop in net profits folks...and that ain't good.

Analysts polled by Thomson Financial expect first-quarter earnings for S&P 500 components to drop 12%. Not surprisingly, the financial sector is seen likely to perform the worst, with earnings expected to drop 60%, while energy-sector firms are seen as the best with an anticipated 28% rise.

"What we see is that first-quarter earnings will likely fall below expectations," said an analyst at Covered Bridge Tactical. "The market moves on expected future growth, and if the last quarter was worse than expected, that dampens expectations going forward...This could be a tough reporting season."

I can hear the phone call now as Alcoa's CEO dials the Fed, "Hello, chairman Bernanke? Is this Ben? This is Alain Belda of Alcoa calling. Oh, I got the machine." Mr. Belda then hears, "Welcome to the answering service of the Federal Reserve. Press 1 to continue in English. Press 2 for the language of your choice. Press 3 for bailouts." Mr. Belda proceeds to press #3.

Real Time Trading Signals*for

Trade Date: 4/7/08

E-Mini S&P Trades*
(before fees and commissions):


1) Engf sell @ 9:05am at 1379.75 = +2.75 (1 lot)

2) OTF sell @ 10:00am at 1380.00 = +.75 & -.75

3) FT buy @ 10:50am at 1383.75 = b/e (1 lot)

4) FT buy @ 12:05pm at 1385.50 = -2.00 (1 lot)...+.75

E-Mini Russell Trades*
(before fees and commissions):


1) Buy @ 9:02am at 717.7 = +.4 & -1.2

2) Sell @ 9:37am at 715.4 = b/e (1 lot)

3) Buy @ 10:34am at 717.6 = +.8 (1 lot)

4) Buy @ 10:55am at 718.1 = +.5 (1 lot)...+50.00


Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!