Illinois Tool Works (ITW: sentiment, chart, options) is enjoying a lift from strength in the broad market this afternoon despite some weak fundamental news. The shares are up 0.4% this afternoon following an announcement that it was cutting its fourth-quarter earnings forecast from continuing operations for 2008. The new fourth-quarter forecast for continuing operations range is between 44 cents and 52 cents per share, versus its prior range of 74 per to 82 cents per share. This new forecast assumes a revenue decrease of 7% to 9%. For the full year, the company is now forecasting income per share from continuing operations to be in a range of $2.94 to $3.02.

Technically speaking, the shares are down from their intraday high of $34.53 and are hovering in the $32.50 region. The stock has been trapped in a sideways channel between support at the 29 level and resistance at the 35 level since mid-October. From a longer-term perspective, the stock is encountering resistance at its descending 10-week moving average, a trendline ITW has not finished a week above since the end of September.

Meanwhile, options players are extremely pessimistic when it comes to ITW. The Schaeffer's put/call open interest ratio for ITW stands at an annual high of 0.94. In other words, options speculators have not been more pessimistically aligned toward the shares at any other time during the past 52 weeks. What's more, this pessimism can be seen on the International Securities Exchange (ISE). During the past 10 trading sessions, an average of 36.6 puts has been bought to open for every 1 call purchased to open. This ratio of puts to calls is higher than 99% of all those taken during the past 52 weeks. With the stock trapped in a trading range, this wealth of pessimism would seem to indicate that investors are expecting the shares to resume their long-term downtrend.