United Parcel Service (UPS: sentiment, chart, options) presented the Street with some bad news yesterday when it slashed its first-quarter earnings outlook due to the weakening U.S. economy and significantly increased fuel costs. The delivery company now forecasts earnings of 86 cents to 87 cents per share, compared to its previous estimate of 94 cents to 98 cents per share. Analysts had been expecting a profit of 93 cents.

Chief Financial Officer Kurt Kuehn said in March that UPS's earnings guidance for the quarter would be difficult to achieve if lower volume trends experienced in February continued through March. UPS blamed the weakening economy, as it has caused a drop in domestic package volume and a shift away from premium products.

The shares of UPS are poised to gap more than 3% lower this morning following the firm's negative outlook. This drop will put the security below newly won support at its 10-week and 20-week moving averages. From a long-term perspective, the stock has been trapped in a sideways channel between support in the 66 area and resistance in the 80 region since January 2008.

One concern is that investors are relatively optimistic when it comes to UPS. The Schaeffer's put/call open interest ratio for the security stands at 0.57, which is lower than 89% of all those taken during the past 52 weeks. In other words, options speculators have been more optimistically aligned toward the stock just 11% of the time during the past year.