Bears Take Aim at Dow 13K; Tech in Focus

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After paring most of its losses in yesterday's session, the Dow Jones Industrial Average (DJI) was able to maintain its foothold north of the crucial 13,000 mark. This key technical level will remain in focus heading into today's trading, with futures on the broad-market index pointed south.

  • The CBOE Market Volatility Index (VIX) eked out a second daily close atop its 100-day moving average -- a feat not accomplished since late November. Will today's market activity make it three in a row?
  • The iShares Russell 2000 Index Fund ( IWM ) will once again test neckline support.
  • According to Equities Analyst Bryan Sapp, "The technology sector will be a hot one to watch today."
Among equities in focus, shorts reduced their bearish exposure on Rackspace Hosting (RAX ) ahead of last night's announcement; options players picked up pre-earnings calls on Electronic Arts (EA ) ; and, a top-line miss has Fossil (FOSL ) staring at a steep post-earnings plunge.

And now, on to the numbers...

Dow, S&P and Nasdaq futures

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 963,179 call contracts traded on Monday, compared to 633,732 put contracts. The resultant single-session put/call ratio arrived at 0.66, while the 21-day moving average was 0.65.

NYSE and Nasdaq summary

Volatility indices

From the Trading Floor

Sapp explains, " Technology was the strongest sector yesterday, including Apple ( AAPL ) . Plus, tech stocks RAX and EA reported earnings after last night's close."

American Association of Individual Investors (AAII) Investors Intelligence (II) this yesterday SPX

Currencies and Commodities

  • The U.S. dollar index is 0.2% higher this morning, last seen at $79.73.
  • Crude oil continues to trek lower , with crude for June delivery down 1.1% at $96.86 per barrel.
  • Meanwhile, gold futures have pulled back 0.7% to trade at $1,627.60 an ounce.

Currencies and commodities

In earnings news, Rackspace Hosting, Inc. (RAX - 57.80) said its first-quarter profit swelled 68% on a year-over-year basis, arriving at $23.2 million, or 17 cents per share, while revenue soared 31% to $301.4 million. The results were mixed, with analysts calling for a per-share profit of 17 cents on $300.5 million in sales. Shorts interest backpedaled 7% in the latest reporting period, but still accounts for a lofty 7.1% of the stock's float. RAX is down 12% in pre-market trading.

Electronic Arts (EA - 15.13) banked a fiscal fourth-quarter profit of $400 million, or $1.20 per share -- more than doubling its year-ago earnings -- as revenue ramped up 26% to $1.37 billion. On an adjusted basis, EA netted 17 cents per share, while revenue declined 1.8% to $977 million. Wall Street was expecting a profit of just 16 cents per share on $957.9 million in revenue. However, EA predicted an adjusted first-quarter loss of 40 cents to 45 cents per share on revenue of $500 million -- well short of the consensus estimate for a loss of 33 cents per share on sales of $579.4 million. Traders on the International Securities Exchange (ISE), Chicago Board Options Exchange ( CBOE ), and NASDAQ OMX PHLX (PHLX) bought to open 2.56 calls for every put during the previous 10 sessions. EA has pulled back 3.2% ahead of the bell.

Finally, Fossil, Inc.'s (FOSL - 125.77) first-quarter profit edged up 4.2% to $58.1 million, or 93 cents per share. Revenue, meanwhile, rose 9.8% to $589.5 million. Analysts had forecast earnings of 92 cents per share on $617.6 million in sales. Near-term puts were popular on FOSL ahead of earnings, with the stock's Schaeffer's put/call open interest ratio (SOIR) sitting at 1.36. FOSL is on pace to start the session with a 19% plunge.

Earnings and Economic Data

There are no major economic reports slated for today, but earnings action continues with results from Walt Disney ( DIS ) , Patriot Coal ( PCX ), Quicksilver Resources (KWK) , Hecla Mining (HL), Demand Media (DMD) , DirecTV (DTV), Fossil (FOSL) , and Jazz Pharmaceuticals (JAZZ).

Overseas Trading

Asian markets ended mixed today, as jitters continued to linger over political upheaval in Greece. Property stocks were a pocket of weakness in Hong Kong, pressured by news that Industrial and Commercial Bank of China halted mortgage discounts for first-time buyers. However, stocks in Seoul and Tokyo recovered from Monday's steep losses, taking a cue from Wall Street's post-election resilience. By the close, Japan's Nikkei rose 0.7%, South Korea's Kospi advanced 0.5%, Hong Kong's Hang Seng declined 0.3%, and China's Shanghai Composite shed 0.1%.

European equities are pointed mostly lower at midday, as Greece remains a serious point of concern for investors. After the New Democracy party failed to form a majority coalition, the austerity-averse Syriza will now attempt to assemble its own government. With Athens apparently at risk of losing its hard-won bailout funding, traders seem none too impressed by a stronger-than-forecast reading on German industrial production. At last check, the French CAC 40 is down 0.9%, the German DAX is off 0.1%, and London's FTSE 100 has crept 0.2% higher.

Overseas markets

Unusual Put and Call Activity:

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This article appears in: Investing , Options

Referenced Stocks: AAPL , CBOE , DIS , IWM , PCX

Schaeffer's Investment Research

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