When It Pays To Stick To Your Bias

  • July 6, 2001
  • Marc Dupee


Consider checking TradingMarkets’ Market Bias Indicators page every day for potential signs of market direction. If three or more signals from the page are pointing in the same direction, there is a stronger-than-normal chance that the major market averages could move in the direction of the bias.

Today we have a “critical mass” of three down-pointing bias indicators — the Connors VIX Reversal II,
CHADTP and TRIN Thrust — as the market sells off.

The Dow is down by 226 at 10,252, the Nasdaq is off 68 at 2012.09, and the S&P 500 is down 26.50 at 1192.74.

Earnings woes are plaguing the Street for a second day after the largest British telecom equipment maker, Marconi
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PowerRating) fired a warning shot across the bow of tech on Thursday. Yesterday’s warning sent MONI down 50% and markets in Europe and the US. MONI is off another 11% today, highlighting the global slump in telecom and telecom equips.

Today, US firms are firing their own warning shots as chipmaker Applied Micro Devices
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PowerRating) and storage heavyweight EMC
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PowerRating) chime in with their own outsized earnings cautions. AMD said stiff competition and a drop in demand for flash memory would result in earnings in the
3 to 6 cent range rather than the consensus 27 cents.

EMC’s salvo warned of a decline of earnings to six cents from a consensus forecast of 17 cents. EMC and AMD are each off 20%.

BMC Software
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PowerRating) also halved its Q1 profit forecast to seven cents, prompting skeptics to dump shares and give the stock a 10% hair cut so far on the session.

News out today that the Securities and Exchange Commission is investigating 40 large companies for “accounting fraud” is doing little to boost investor confidence that corporate earnings guidance and reporting can be trusted. Xerox and Sunbeam are among the 40 firms under investigation.

A report out today on rising unemployment is also working to add insult to injury about the state of the economy and market. The Labor Department said unemployment matched a two-year high of 4.5% today. Manufacturing was particularly hard hit with twice the number of workers losing their jobs in the sector than estimated by analysts.