Wall Street had another rough day today with the Dow losing 514 points on worries that the global economy is rapidly weakening. The primary worries have shifted from the credit crunch to worries about corporate earnings as global markets envision rough times ahead.

The U.S. dollar has soared recently and today hit a multi-year high against other major currencies. The strengthening dollar has caused oil, raw materials and commodity prices to plummet in recent weeks. The price of oil is tied to the U.S. dollar so as the dollar rises oil will typically fall. The following chart shows the DJ US Oil & Gas index vs. the US. Dollar index for the last 5 months which shows the divergence of the paths taken by the U.S. dollar vs oil.

The Dow fell 514.45, or 5.69 percent, to 8,519.21, after being down as much as 698 points in the final half hour of trading. Still, the Dow finished above its Oct. 10 closing low of 8,451. The Dow fell 231 points Tuesday after jumping 413 points Monday. Broader stock indicators also fell Wednesday. The Standard & Poor’s 500 index lost 58.27, or 6.10 percent, to 896.78, its lowest close since it finished at 892 on April 21, 2003. The technology-heavy Nasdaq composite index fell 80.93, or 4.77 percent, to 1,615.75.

Below is a chart of the Dow Jones Industrial Average Index for the last several weeks. As you can see a symmetrical triangle is forming. A Symmetrical triangle is usually followed by a continuation of the trend that formed it which would mean that we have not yet reached the bottom of the market and we could logically expect further declines ahead. Triangles, which are among the most common continuation patterns, can also be top and bottom formations as well. The key will be which way the chart breaks out of the triangle formation. If it breaks out to the upside then this might represent a bottom to the market and a reversal in the trend, or if it breaks out to the downside we may see a further slide. The next major downside resistance level is market lows last seen in 2002. Let’s all hope this symmetrical triangle
formation represents a market bottom and a trend reversal.

Credit markets showed continuing improvement. Inner-bank lending rates fell overnight indicating that inter, indicating that credit is becoming easier to obtain. The Libor 3 Month rate fell to 3.54 percent from 3.83 percent, continuing an eight day trend.

The three-month Treasury bill yielded 1.00 percent, down from 1.07 percent late Tuesday. The levels are a notable improvement from the 0.20 percent seen last week when investors were willing to take almost Zero return in exchange for a safe place to stash their money. The dollar was sharply higher against other major currencies, while gold prices fell.

Investors are nervous about corporate earnings and what the credit squeeze has done to business performance. Earnings performance will likely continue to worsen for at least the next few quarters and the market is likely to remain volitile until things calm down and investors price in the current and future bad news.

Worry that global markets are following the U.S. down into the financial muck have helped the dollar with its amazing turnaround and rise over the last few months. Back in July when oil was at its highest, the dollar was at it’s lowest. The greenback rose against currencies like the British pound and the euro as investors worried about weakening international economies. The strong dollar helped drive down the price of oil, as did a government report that U.S. fuel supplies rose last week. Light, sweet crude fell $5.43 to $66.75 a barrel on the New York Mercantile Exchange, after falling as low as $66.20.

Oil’s decline is helping some industries such as the airline industry. Airline issues were among the few sectors today that fared better than most.

Some tech names advanced. Apple rose after the company reported a 26 percent increase in its fiscal fourth-quarter earnings. The stock rose $5.38, or 5.9 percent, to $98.87. Yahoo reported a 64 percent drop in third-quarter profits but said it would cut at least 1,500 jobs, cost-cutting that appeared to please investors. The shares rose 32 cents, or 2.7 percent, to $12.39.

Declining issues outnumbered advancers by about 5 to 1 on the New York Stock Exchange, where volume came to 1.56 billion shares.

The Russell 2000 index of smaller companies fell 28.68, or 5.40 percent, to 501.97.

Markets overseas fell sharply. Japan’s Nikkei stock average fell 6.79 percent. Britain’s FTSE 100 fell 4.46 percent, Germany’s DAX index fell 4.46 percent, and France’s CAC-40 lost 5.10 percent.

The good news is that when you examine the fundamentals of stocks there are many, many quality companies out there that have stocks that are selling for very cheap. As we have said in past blog entries, this is the time that the pro’s step up to the plate and buy stocks at dirt cheap prices.