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Market Preview: That Sinking Feeling

That's a full plate of issue to resolve in a little less than three months and some of Stovall's optimism stems from positive technical trends.

"U.S. equity indices are approaching huge chart support, so we think that most of the damage is almost over," he said. "Once the pullback ends, we see new recovery highs with the S&P 500 heading up toward all-time territory in the 1,550 to 1,580 region, which is major chart resistance from the 2000 and 2007 highs."

The bulls out there are no doubt hoping he's right but the bears might argue the charts alone won't turn the trick. Lest we forget, Europe remains a big fat question mark as evidenced by Standard & Poor's moving to downgrade Spain's long-term credit rating to a notch above junk after Wednesday's closing bell.

As for Thursday's scheduled news, Safeway (SWY) is reporting its third-quarter results before the opening bell, and the average estimate of analysts polled by Thomson Reuters is for a profit of 42 cents a share in the September-ended period on revenue of $10.24 billion.

Shares of the Pleasanton, Calif.-based grocery store operator are down nearly 10% in the past year, peaking with a 52-week high of $23.16 on Feb. 21, as the company struggles to grow the top line and increase same-store sales.

Safeway has beaten Wall Street's profit expectations for the past six quarters but an in-line performance in the third quarter would be a comedown from earnings of $177.6 million, or 50 cents a share, on revenue of $10.39 billion in the second quarter. The company's current guidance is for earnings of $1.90 to $2.10 a share for the full year with identical-store sales growth of 1%-2%, excluding fuel.

The sell side is mostly negative on Safeway with 15 of the 21 analysts covering the shares at either hold (9) or underperform (6) and the 12-month median price target at $17 vs. Wednesday's closing price of $16.29.

Cantor Fitzgerald previewed the report on Tuesday, saying it's slightly below consensus with an estimate for earnings of 41 cents a share and that it sees identical store sales up 1% for the quarter, excluding fuel. The firm has a sell rating and $14 price target on the stock.

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