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It was all about confidence Tuesday, and confidence remains the key to the market and to the economy in the immediate future. After the market withstood the Fed's "no confidence" vote last week and even rallied on Cisco's (CSCO) less-than-wildly-bullish announcement Friday, its reaction to the modest decline inconsumer confidence Tuesday illustrated just how fragile the market's technical underpinnings are these days. In fact, the data, ordinarily a less-than-critical metric, were really only as negative as Cisco's pronouncement that business is beginning to stabilize was positive.

Welcome to the world's largest and most important head game. And for an encore, Wednesday's first revision to second-quarter gross domestic product promises to carry more importance than it ever does in "normal" times. It's a given that GDP will be revised lower; the only things in question are whether the number is positive or negative and how a very thin market will digest the news. From my perch atop the world, it's hard to see how the data can possibly bring glad tidings and cheer. Then again, we're talkin' government numbers here, which sometimes prove to be mystical and unfathomable. Stay tuned. It could be a wild ride Wednesday morning.

Problems Ahead

Needless to say, stocks were lower in Euroland Wednesday morning, and the Nikkei made yet another new 17-year low, closing below the 11,000 mark as bank stocks were pounded. Bank stocks here at home also look vulnerable to further downside pressure as the domestic economy remains cloudy and consumers are barraged with news of massive layoffs on a daily basis.



was the latest to announce that it's slashing its payroll, as it will dispose of 25% of its workforce.

Bank of America


, which has significantly outperformed the Philadelphia Stock Exchange/KBW Bank Index since the July lows, appears to be particularly vulnerable technically, and further weakness in the financial sector bodes ill for the overall market. It's not Japan, but the outlook for profits isn't pretty either.

Wednesday also brings



analyst meeting, but you don't need a vivid imagination to realize that it's likely to guide estimates lower. Goldman Sachs' Laura Conigliaro cut her numbers again Tuesday, and her track record indicates that many others are likely to follow Wednesday. Although

Texas Instruments


said it sees improved demand for handset chips, which temporarily offset Conigliaro's call, the semi complex looks dire. The Philadelphia Stock Exchange Semiconductor Index lost 2.8% in the final two hours of trading Tuesday and took out its 20-day simple moving average. All of the major market measures closed on their lows, with the



closing below 39 for the 10th straight session. Confidence in a near-term reversal in chip demand is rapidly eroding, and the group continues to look very attractive from the short side.

Biotech Opportunities

With electronic tech likely to remain under intense selling pressure, traders might view biotechs as an attractive alternative. The American Stock Exchange Biotechnology Index was hit for 2.2% Tuesday, but







Celera Genomics






Human Genome Sciences



IDEC Pharmaceuticals


all look as if they have enough upside momentum to buck the overall downward market trend. Obviously, these are risky vehicles in times of stress, so aggressive traders should employ relatively tight stops.

As analysts continue to revise overly optimistic estimates, the market is unlikely to manage much, if any, headway. Yes, the economy has shown signs of stability, no doubt a function of the Fed's aggressive easing and the impact of tax rebates. However, with consumer confidence very fragile and likely to erode as more layoffs are announced, lower rates can only do so much. Just look at what's happening in Japan. While the U.S. situation isn't as bad as Japan's (the banking system isn't moribund, only unlikely to deliver much in the way of earnings growth), it's not very good, either.

Lower prices, especially in the financials, retailers and techs, combined with more bearish sentiment and lower earnings estimates are necessary for a solid bottom from which the market can rally. I'm relatively confident that can be accomplished over the next month or so, and that we can end the year on a solid note. But, don't be conned into thinking that the bottom is in, especially on the


, as its April low is unlikely to hold. Be careful out there.

Bill Meehan is the chief market analyst for Cantor Fitzgerald, a Manhattan-based institutional trading and research firm, and writes daily for the Cantor

Morning News. Before that, he was a market analyst for Prudential Securities. At time of publication, Meehan was long Bank of America puts, Sun, Merrill Lynch Semiconductor Holdrs puts and QQQ puts, although holdings can change at any time. He appreciates your feedback at

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