Analysis and Opinion »

The Start of Earnings Season Could Halt Stock Slide

David Becker
Share on StockTwits
Published on
The Start of Earnings Season Could Halt Stock Slide

The technical damage to US stocks has been rather severe, as the Nasdaq 100 has declined nearly 7% since its highs in early March. The decline in stocks was led by the momentum stocks including the bio-techs which have dropped nearly 19% since late February. The correction, which is now underway needs an impetus to halt the decline and the one currently standing in the way of market bears enjoying a further decline, is the beginning of earnings season.

Alcoa kicks off the first quarter season on Tuesday after the closing bell. Analysts have forecast that Q1 earnings per share for the metal giant fell to $0.05 from $0.11 as revenue dropped 4.9% to $5.55 billion. Deutsche Bank (NYSE:DB) on Monday upgraded Alcoa (NYSE:AA) to Hold from Sell, citing expectations of higher realised aluminum prices. A weekend report said Alcoa may be turning around, due to its commitment to using aluminum for cars and as global producers have begun to cut capacity. The stock price has held up well despite the broader market route.

Investors are now looking at many of the major indices and attempting to determine if prices have found support levels. The Nasdaq 100 bounced on Monday after testing an upward sloping trend line that connects the lows from November to the low in February and comes in near 3500. Below this level is the 150-day moving average near 3463. Momentum on the Nasdaq is negative with the MACD printing in negative territory with a downward sloping trajectory. The RSI (relative strength index) moved lower with price action reflecting accelerating negative momentum while printing near 35, which is on the lower end of the neutral range and just above the oversold trigger level of 30. Volatility on the Nasdaq has been substantial with the Bollinger band width touching its highest levels in the past 6-months.

Share on StockTwits

Iron FX 1.11156/1.11128 2.8
XM Markets 1.09948/1.09928 2
FxPro 1.10184/1.10171 1.3
FXCM 1.13943/1.13912 3.1