Last night we got shocked two times. Two stocks that never fail as far as I can remember both warned on their earnings reports. The month of May, once again, the culprit to these warnings. Bed Bath & Beyond, Inc. (BBBY) and Nike Inc. (NKE) both said things fell faster than they thought would happen and that there will be pricing pressure for the foreseeable future. Both stocks took it on the chin today as they joined previous chin music recipients Best Buy Co. Inc. (BBY), Adobe Systems Inc. (ADBE), ConAgra Foods, Inc. (CAG), Carnival Corporation (CCL), and FedEx Corporation (FDX). Both closed near their lows today off of gap downs. In other words, they're dead stocks for months to come. Nike down 4% and Bed Bath & Beyond down 6%, with gaps now acting as strong resistance.

There really hasn't been a single stock that's considered economically important to say anything good about anything. When these companies reported their earnings in March, they were feeling very good about things as the stimulus red carpeted by the President was kicking in and making things look good even though they really weren't. The stimulus seemed to have gone away the same time the tax break died on April 30th for new home buyers. Those same CEO's who said things were good are now saying things are not so good. Caught with their pants down. Shows you how even the smartest people can get emotional with things and give guidance that's unattainable.

Now they're all warning, and instead of the market giving them a break, the market is ripping them apart. It's no different tonight. Research In Motion Ltd. (RIMM) reported their earnings tonight and they too warned and are taking a huge hit. Down nearly 3$ for a 58$ stock. Nearly 5%. If this holds, and it's likely it will, add another to the pot of the earnings reports that will cause a particular stock to struggle for some time. Again, the more you lose the harder it is for the market to advance forward. The earnings season thus far is a true bust. My fear on this subject has become a reality unfortunately.

The market was interesting today. We opened lower but nothing bad as we were well off the lows even though we had reports on both durable goods and jobless claims. Neither was good as we are now contracting on durable goods. The futures rallied anyway but still fell below the break even point. The gap down started to accelerate which put more space between the S&P 500 and 1100 where we now have massive resistance. As the market fell to a 100 point plus loss the 60-minute charts got very oversold. We went from roughly -130 to -38 on the Dow as things unwound on the oscillators.

Once this unwinding completed itself the market started to fall once again. We closed just off the lows but down near them on bad internals. 1100 is now 3% away and that's making any rally back up more difficult in terms of being able to clear through 1100 with any force. A very negative day for the bulls but we're still 3% above 1040 where the breakdown lives. Only when the bears snap through S&P 500 1040 with force can we safely say things are a lot worse than any bull had hoped it would it be.
The range is large now for the markets. A break below 1040 turns the market south in a big way but a break above 1150 or the January high puts the market in very good shape. Short-term the range is now 1105 down to 1040. At some point in time we will make the move through one of those key numbers, 1040 or 1150. Not to state the obvious but it feels like neither side will ever get the job done. Of course, one side will take over and if these earnings and economic reports keep coming in such as they have been, the bears are going to ultimately take out 1040. The head-and-shoulders pattern that is in its sixth month measures down to 860. 1220 head and 1040 neckline equals 180 points below the 1040 level or 860.

Never a guarantee these measurements play out but for now that is the measurement. We can stay in a trading range a lot longer than any of us want to believe possible. Be prepared for that, but make no mistake that this market is currently in a down trend that is getting worse based purely on bad earnings and economic reports. We lost 1105 so quickly after taking so long to get through and this behavior alone is negative. Respect the message the market is throwing out at us.

Very short-term the Standard & Poor's Depositary Receipts (SPY) has a gap at 107.30. We closed at 107.42, just twelve cents above. The market is extremely oversold on the 60-minute time-frame charts across the board with RSI's at or below 30. This combination should afford the market a bounce. Don't expect the world but that gap is there and they're never easy to get through. Add in very oversold and the market should hang in there a bit very short-term. Beyond, an expected bounce things, don't look very good at all. Being below all the key exponential moving averages makes things difficult at best for the bulls and should give the bears some confidence that they can move the S&P 500 through 1040 in time. Cash is still best but we'll watch how things set-up for the market once things unwind a bit to the up side.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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