Stocks were caught in a sharp sell-off yesterday, despite better-than-expected earnings from a number of companies. But investors seemed more interested in what will be than what was, and to them the future looked not as bright as it did just a few days ago. The selling really took off when a report showed that new home sales fell 3.6% in September.

Stocks ended near the session’s lows with nine of the 10 S&P sectors showing a loss.

Financial stocks were hurt the worst, falling 3.2%. But Visa (V) posted a gain of 3.61% after reporting better-than-expected earnings the night before. 

But the U.S. dollar gained ground for the fifth consecutive session and the CRB Commodity Index fell 2%, with energy and gold closing lower. Leading energy stocks like Exxon Mobil (XOM) fell 1.43%, and Apache (APA) was hit for a loss of 4.39%.

Telecom stocks beat the rest of the list by advancing 1.8%, with Verizon (VZ) up 2.6% and AT&T (T) up 1.9%. Verizon was helped by a favorable report from Moody’s Investors Service.

At the close, the Dow Jones Industrial Average (DJI) was off 119 points to 9,762, the S&P 500 (SPX) fell 21 points to 1,043, and the Nasdaq (NASD) was down 56 points to 2,060. 

Decliners were far ahead of advancers on both exchanges — both at a ratio of 8-to-1. The NYSE traded 1.7 billion shares, and the Nasdaq traded 849 million.

December crude oil fell $2.09 to $77.46 a barrel, and the Energy Select Sector SPDR (XLE) fell $1.91 to $55.94, both a result of an unexpected rise in U.S. inventories of gasoline and a higher dollar. 

December gold fell $4.90 to $1,030 an ounce. The PHLX Gold/Silver Index (XAU) fell $8.31 to $154.92.

What the Markets Are Saying

Since the Oct. 21 intraday high on the S&P 500, the market has been drubbed in five of those six trading days for a total loss of 5.3%. And even if it appears to be just part of the back-and-forth that we’ve seen since late April, which has defined the limits of the bull channel, this pullback feels much more intense. 

Yesterday, the broad market had a ratio of 8 sellers for every buyer, and volume up was at 36% and volume down at 64%.

On the Nasdaq, it was much worse with the up volume at just 8% and down volume at 92% — and that represents some very heavy selling.  

But the Relative Strength Index (RSI) closed at 41.30, the lowest reading since July 9, and almost connects the three prior lows with the downward sloping line mentioned yesterday. That could indicate that a trading bottom is pending.

Considering just these factors, we could conclude that a mild early morning round of romping bears could end with an upside reversal. But the S&P 500 closed slightly below both its supporting trend line and the 50-day moving average. And the Nasdaq crushed the 50-day moving average.

Our signals today will depend on the close. If we continue lower, then I’d be looking for a pullback to at least 1,020 on the S&P. But if we get an upside reversal, then it’s time to jump on your favorite trading stocks and run them to the top of the bull channel again.

The tops of the channel for each index are S&P 500 1,110 (maybe even 1,120) and Dow 10,200. 

Since many stocks broke down through double- and triple-bottoms, a reversal up or a lower close would be significant. The market will tell us what to do next.

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Today’s Trading Landscape

Earnings to be reported include:
3Par
ABB Ltd., Accuray, Acme Packet, Actuate Corp., AES Corp., Aetna, AGL Resources, Airgas, Airvana, Aixtron AG, Alaska Communications Systems Group, Alcatel-Lucent, Alexander & Baldwin, Alexza Pharmaceuticals, Allegheny Energy, Allergan, AllianceBernstein Holding L.P., AMAG Pharmaceuticals, American Sports Oyj, American Electric Power Co., American Physicians Capital, American Superconductor Corp., AMN Healthcare Services, Anadys Pharmaceuticals, Anaren, Apache Corp., Applied Micro Circuits Corp., Art Tech Group, Asbury Automotive Group, AstraZeneca PLC, Astronics Corp., Asustek Computer, Athenahealth, Atlantic Tele-Network, Atlas Pipeline Partners L.P., AutoNation, Avnet, Avon Products
Baldor Electric Co., Ball Corp., Bally Technologies, Banco Santander-Chile, Bancorp Rhode Island, Bankrate, Bare Escentuals, Barrick Gold Corp., Basf S.E., bebe Stores, Beckman Coulter, BioCryst Pharmaceuticals, Black Hills Corp., Blockbuster, BMC Software, BRF-Brazil Foods S/A, Brink’s Co., Brunswick Corp., Brush Engineered Materials, Buckeye Partners L.P., Build-A-Bear Workshop, Burger King Holdings
CAL International, Callaway Golf Co., Callidus Software, Cambrex Corp., Camden Property Trust, Carbo Ceramics, CardioNet, Cbeyond, CBIZ, CDI Corp., CEC Entertainment, Central Pacific Financial Corp., Cerus Corp., Chart Industries, Cincinnati Financial Corp., Cliffs Natural Resources, CME Group, CMS Energy Corp., Colgate-Palmolive Co., Columbia Banking System, comScore, Conexant Systems, Continental AG, Corinthian Colleges, Cott Corp., CryoLife, Curis, Curtiss-Wright Corp.
Dassault Systemes, DCT Industrial Trust, Deltek, Denny’s Corp., DepoMed, Deutsche Bank AG, Dime Community BancShares, Dionex Corp., Dollar Financial Corp., Dominion Resources, Dover Downs Gaming & Entertainment, DTE Energy Co., Dynamic Materials Corp.
Eastman Kodak Co., El Paso Electric Co., Electronic Arts, EMCOR Group, Enbridge Energy Partners L.P., Endo Pharmaceuticals, Endurance Specialty Holdings Ltd., Energen Corp., ENI S.p.A., EnPro Industries, Epicor Software Corp., EQT Corp., eResearch Technology, Exelixis, Expedia, Exxon Mobil Corp.
Fairfax Financial Holdings Ltd., First American Corp., First Niagara Financial Group, First Potomac Realty Trust, FreightCar America
Gen-Probe, Genesis Lease Ltd., Gentiva Health Services, Genworth Financial, GFI Group, Global Cash Access Holdings, Gold Fields Ltd., GrafTech International Ltd.
Hain Celestial Group, Hansen Medical, Harman International Industries, Harris Stratex Networks, Harsco Corp., HealthSpring, Heartland Payment Systems, Hertz Global Holdings, Holly Energy Partners L.P., Hypercom Corp.
I.D. Systems, IDACORP., ImmunoGen, Imperial Oil Ltd., Ingram Micro, Interactive Data Corp., Intermec, InterMune, Investment Technology Group, Iowa TeleCommunications Services, Iron Mountain
Kansas City Southern, KB Financial Group, KER, Kellogg Co., Kennametal, Key Energy Services, KLA-Tencor Corp.
LaBarge, Lancaster Colony Corp., LeapFrog Enterprises, Littelfuse, Liz Claiborne, LKQ Corp., Lubrizol Corp.
Manitowoc Co., MarineMax, Maxim Integrated Products, McAfee, MDC Partners, Medarex, Meredith Corp., Metabolix, MetLife, Metso Corp., Mettler-Toledo Intl, Micros System, Midas, Mine Safety Appliances, Mohawk Industries, Monster Worldwide, Moody’s Corp., Motorola, MPS Group, Mylan
Nanometrics, National Penn BancShares, Navigant Consulting, Neptune Orient Lines Ltd., Neurocrine Biosciences, Newmont Mining Corp., Newpark Resources, Noble Energy, NorthWestern Corp., NovaMed, Novatel Wireless, Novo Nordisk A/S, NRG Energy, Nu Skin Enterprises
O’Charley’s, Odyssey Re Holdings Corp., Office Depot, OfficeMax, OGE Energy Corp., Olympic Steel, OpenTable, Oplink Communications, OPNET Technologies, Orthofix International, OSI Systems, Otter Tail Corp.
Palomar Medical Technologies, Patterson-UTI Energy, PC-Tel, Pepco Holdings, PerkinElmer, PG&E Corp., PharMerica Corp., Phase Forward, Pinnacle Entertainment, Pinnacle West Capital Corp., PNM Resources, Portfolio Recovery Associates, Portland General Electric Co., Powerwave Technologies, PPL Corp., Preferred Bank Los Angeles, Pride International, Proctor & Gamble
Radiant Systems, RADVision Ltd., RealNetworks, Regis Corp., Royal Dutch Shell PLC, RSC Holdings, Ruddick Corp.
SBA Communications Corp., Seacoast Banking Corp of Florida, Sempra Energy, Senomyx, Sequenom, Shaw Group, Signature Bank, Silicon Motion Technology Corp., Simpson Mfg Co., Smith International, Snap-On, Solvay S.A., Sourcefire, Sprint Nextel Corp., Standard Pacific Corp., Stanley, StarTek, Steiner Leisure Ltd., Sterlite Industries Ltd., Stratasys, Strayer Education, Superior Industries International, SureWest Communications, Symmetricom, Syntel
Taiwan Semiconductor Manufacturing, Techwell, TeleCommunication Systems, Telenor ASA, TenneCo., Tessera Technologies, Thoratec Corp., Tidewater, Timberland Co., Timken Co., Town Sports International Holdings, TranS1
Ultralife Corp., Unit Corp., United Therapeutics Corp., Universal Health Services, UPM-Kymmene Corp.
Valassis Communications, Varian Medical Systems, Varian Semiconductor Equipment, Vectren Corp., Ventas, Virgin Media, VisionChina Media, Vistaprint N.V., Volcom, Volkswagen AG
Wabtec, Waste Management, Websense, West Pharmaceutical Services, Westport Innovations, Williams Companies, Williams Partners L.P., Williams Pipeline Partners L.P., Wisconsin Energy Corp., World Acceptance Corp., Wright Medical Group
Xcel Energy

Economic reports due: jobless claims (the consensus expects 525,000), GDP (the consensus expects 3%), DJ-BTMU U.S. Business Barometer, EIA natural gas inventories, Kansas City Fed manufacturing index, money supply, Fed discount window borrowings and foreign central bank holdings.

Late news: Proctor & Gamble (PG) reported Q1 EPS of $1.06 versus a 99-cent estimate. Motorola (MOT) reported Q3 EPS of 1 cent versus an estimate of 0. Sprint (S) reported 2 cents versus a 15-cent estimate. Aflac (AFL) reported $1.25 versus a $1.20 estimate. Colgate (CL) reported $1.12 versus a $1.11 estimate. CME Group (CME) reported $3.35 versus a $3.29 estimate.  

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