CHICAGO ( TheStreet -- Although all of the discussion on the broader market of late has been highly bullish, many obstacles remain in the path of substantially higher moves in equities, at least in the near term. And with so much attention focused on the Chinese economy helping to lead us out of this global recession, any severe weakness -- witness Wednedsay's selloff -- there could undermine the recent economic optimism. Many of the companies reporting earnings thus far have exceeded analyst estimates. But the bulk of these earnings beats have come at the hands of drastic cost-cutting measures manifested as severe product cutbacks and employee layoffs. One need only look at the top-line revenue numbers released by many of these companies to see that in fact business is down -- way down. Caterpillar ( CAT) was a great example of this -- with quarterly revenue missing analysts expectations by approximately $1 billion. And although I do feel companies in general are doing a great job of wethering the recession, one must decide if current valuations are justified. The disappointing results from the likes of Honeywell ( HON), Verizon ( VZ) and Sprint ( S) further demonstrate the challenges faced by companies in the current economic environment. The market is also dealing with this morning's readings on durable goods. Although this number did reflect some possible signs of stabilization within the manufacturing sector, weaker orders for autos and airplanes did equate to a 2.5% decrease for June, considerably worse than analysts' expectations of a 0.5% drop.
Let's not forget commodities. I am currently staring into a sea of red on my screen, with very heavy selling occuring in the energy sector, as well as base metals, due to the concern that perhaps equities have overshot the economic recovery. Because of this concern, we are seeing some flight-to-safety trade taking place in the dollar as well, which hurts not only the stock market, but dollar-denominated commodities as well. In addition to this concern, crude oil is currently down almost 5.9% after the government reported a significantly larger than forecast build in weekly supplies. Copper futures, which many consider an excellent "barometer" of the economy, are down sharply as well. Due to the plunging commodities, we are seeing commodity producers such as Alcoa ( AA) and Exxon Mobil ( XOM) trading lower. In my previous article, I talked about being "short deltas" at current levels on crude oil and S&P futures through the use of short call positions. Thus far, the crude oil trade has worked out as we thought it would, with moves near the $70 per barrel level being short-lived and unsustainable. And although I do not normally advocate "fighting the tape," I still feel the S&P has gotten a little ahead of itself. While currently having trouble getting through resistance at the 980 area, I certainly would not rule out an attempt to touch the 1000 level. If we do not see a correction prior to this move, I feel strongly that a first attempt at this level will fail and will continue to provide us with call-selling opportunities that have favorable risk vs. reward parameters.