The World’s Biggest Steps In
The world’s biggest company, General Electric
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PowerRating),
stemmed an early morning cascade by saying it was on track for double-digit
earnings growth. Stocks plunged lower on the opening after President George
Bush delivered a bellicose speech that seems to assure a prolonged campaign
of military action and more uncertain times ahead. The market hates
uncertainty.
The major indices were en route to register their
worst week ever when GE announced it still expects earnings to grow 11% in
fiscal 2001, even after insurance-related losses. Although the number was
slightly below analysts’ consensus estimates, it still encouraged markets and
brought the Dow back to a gain of 50 after tumbling to a 300-point deficit
on the open. The S&P 500 and the Nasdaq Composite had similar reactions,
although the Nasdaq never hit positive territory.
The session remains another roller coaster ride, but
traders who know how to ride such volatility are cleaning up.
The Dow is down 183 at 8192, the Nasdaq is down 50.88
at 1420.36, and the S&P 500 is down 20.87 at 963.67. All three are
trading at three-year lows.
But other name firms are not forecasting the rosy
earnings performance that GE predicts for itself. And in the middle of
earnings pre-announcement season, herein lies the ongoing threat to the
market. EMC
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EMC |
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PowerRating) said it will lose money in Q3, its first loss in
nearly a dozen years. EMC is down 1.25 at 11.37 and was down more than 20%
earlier in the session.
Dow Chemical
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DOW |
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PowerRating) also said it would miss
earnings expectations and was also down more than 20%. Weakness in Dow
Chemical pushed the chemicals index
(
CEX |
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PowerRating) down 6%, unusual for a
generally less-volatile sector. However, Dow has rebounded from its losses
and is currently trading down .33 at 29.25.
Market volatility as measured by the Chicago Board
Options Exchange (CBOE) Market Volatility Index
(
VIX |
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PowerRating) surged to one of
its highest levels, reaching a high of 57.31. The VIX measures volatility on
the S&P 100
(
OEX |
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PowerRating). The previous peak was in October 1998 when the
VIX reached 60.63. TradingMarkets.com has a variety of trading strategies
designed to take advantage of movement in the VIX, many of them invented by
CEO Larry Connors. Signals such as the CVR I through CVR VI are available
daily at Trading Markets on the Market
Bias Indicators Page. Additional articles on the subject by Connors, Dave
Landry and Greg Che are also available in the Education portion of the site
and a new book on the VIX by Connors and Che will be available before the
end of the year.