Sam Collins

How Much Will the Market Correct?

by Sam Collins   11/02/09

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Consider these factors:

1. The end of Q3 earnings season is at hand and so the fuel from those mostly favorable reports will soon be extinguished. 

2. The public is still not overly concerned about the health of the market. From the American Association of Individual Investors (AAII) readings we see that just over 33% are still bullish, while 42% are bearish, despite a rally of more than 65% in the S&P since March. And the Advisor Sentiment Survey is still bearish.

3. The internal indicators are oversold, but none has yet issued a buy signal.

With the majority of technical indicators and charts now pointing lower, it is possible that the major indices will continue to fall to their next support zone, especially if S&P 1,020 is violated. 

For the Dow, that zone begins at 8,900, the S&P's next support starts at 1,010, and the Nasdaq's begins at 2,015. 

Remember, however, that despite the likelihood of a further market correction, the bull market is still strong and a correction of the expected magnitude should be used by astute investors as an opportunity to buy stocks at better prices.

Today's Trading Landscape

Earnings to be reported include: AAON, Administaff, Albany International Corp., Altra Holdings, American Physicians Service Group, Anadarko Petroleum Corp., Anglogold Ashanti Ltd., Argo Group International Holdings Ltd., Array BioPharma, Asset Acceptance Capital Corp., ATS Medical, Avis Budget Group, Axis Capital Holdings Ltd.
BRE Properties, Bridge Capital Holdings, Brookdale Senior Living, Buckeye Group Holdings LP, Buckeye Partners
CameCo, CapitalSource, Carmike Cinemas, Carrols Restaurant Group, Chelsea Therapeutics, Chesapeake Energy Corp., Cleco Corp., Clorox, CNA Financial Corp., Cognex, Comstock Resources, Consolidated Edison, Cooper Tire & Rubber, Corporate Executive Board Co., Cross Country Healthcare, Cutera, CVR Energy
Dean Foods, Diodes, Dollar Financial Corp., Dover Motorsports, Drew Industries, Ducommun, Energy XXI (Bermuda) Ltd.
Ensign Group, Entercom Communications, Extra Space Storage
First Merchants Corp., First Mercury Financial Corp., First State Bancorp, Five Star Quality Care, Flagstone Reinsurance Holdings Ltd., Flanders, Forest Oil Corp., Fundtech Corp.
Greenlight Capital Re Ltd., Guidance Software
Haemonetics Corp., Hawaiian Electric Industries, Hecla Mining, Herbalife Ltd., HFF, HIP International Ltd., Himax Technologies, Humana, Hutchinson Technology
iMergent, Innophos, Interbank, IPC the Hospitalist Co.
Kindred Healthcare, Kinross Gold, Kopin Corp., KT Corp.
LeapFrog Enterprises, Loews Corp., LookSmart Ltd.
Maguire Properties, MannKind, Meadowbrook Insurance, Mednax, Mercury General, Microfluidics International Corp., Multi-Color Corp.
Nam Tai Electronics, National Interstate Corp., Natus Medical, Newprobe, Netlist, Nice Systems, Northeast Utilities
On Assignment, Orbotech, OSG America LP, Overseas Shipholding Group
Parkway Properties, Peapack-Gladstone Financial Corp., Penson Worldwide, Perrigo, Philippine Long Distance Telephone Co., Post Properties, PRG-Schultz International, ProAssurance Corp., PS Business Parks
Questcor Pharmaceuticals
Regal-Beloit Corp., Republic Services, Rogers Corp., Rudolph Technologies
Satcon Technology Corp., Shinhan Financial Group Co Ltd., SRS Labs, St. Mary Land & Exploration, STAAR Surgical, Standard Parking, Sun Hydraulics, SWS Group, Sykes Enterprises, Synchronoss Technologies, Syniverse Technologies, Sysco Corp.
Tasty Baking Co., Technitrol, Texas Roadhouse, TGC, The GEO Group, The Hanover Insurance Group, The Principal Financial Group, Thomas Properties Group, TNS, Transact Technologies
Union Drilling, Unitrin, Uroplasty, USEC
Valeant Pharmaceuticals International, Vanda Pharmaceuticals, Virage Logic Corp., Vulcan Materials
Wonder Auto Technology

Economic reports due: motor vehicle sales (the consensus expects 7.3 million), ISM Manufacturing Index (the consensus expects 53), construction spending (the consensus expects -0.2%), and pending home sales.

Late news: Ford (F) swung to a third-quarter profit as lower vehicle discounts and government incentives drove car sales. The company reported Q3 earnings of 29 cents versus a 12-cent estimate.

Arch Coal (ACI) reported Q3 EPS of 16 cents versus a 4-cent estimate.

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