Dow Jones Industrial Average (DJI)
moved lower again today as investors readied their portfolios for
earnings season. "It was more of the same as yesterday," observed
Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "We
pulled back on light volume as everyone gets ready for earnings
season. Don't worry," Detrick noted, "once earnings season heats
up, we'll start to see more action."
Continue reading for more on today's market, including
- AIG shows some nerve, Groupon (
) attracts some hopeful traders, and our Tweet of the day offers
an important reminder to jaded traders.
It was indeed a near-repeat of Monday, as the
Dow Jones Industrial Average (DJI)
traded in a fairly narrow range but spent the entire day south of
breakeven. By the close, the blue-chip index had given back 55
points, or 0.4%, but remained above its 10-day moving average for
the fifth consecutive session. Still, 14 of the 30 Dow names closed
in the black, led by Hewlett-Packard (
), which appreciated by 1.5%. Alcoa (
) was flat on the day ahead of its earnings release, and Boeing (
) brought up the rear, losing 2.6% amid reports of a fuel leak with
one of its 787 Dreamliner aircraft.
S&P 500 Index (SPX)
moved lower as well, dropping 4.7 points, or 0.3%. The
Nasdaq Composite (COMP)
suffered the smallest deficit, shedding 7 points, or 0.2%.
After spending most of the day in positive territory, the
CBOE Market Volatility Index (VIX)
made it six losses in a row, closing down 0.2 point, or 1.2%.
A Trader's Take
"After the huge rally last week, it could very well have been
time for a break, and that is what we're seeing this week," quipped
Detrick. "The biggest news of the day were the rumors that AIG was
considering suing the U.S. government over violation of the Fifth
Amendment. That's right, suing the same government that bailed them
out. This isn't set in stone and is not certain to actually happen,
but the fact it is even being considered is pretty amazing."
3 Things to Know About Today's Market
- Jaws were heard dropping up and down Wall Street today, as
American International Group (
) deliberated whether or not to join a shareholder lawsuit
against the U.S. government. At issue are the specific terms of
the $182 billion bailout that saved the insurer from bankruptcy
(or worse) in 2008, as shareholders were negatively impacted by
high interest rates. Former AIG CEO Maurice "Hank" Greenberg
initially filed the suit and is now fighting its dismissal in
federal court, while a separate suit proceeds through the US.
Court of Federal Claims. Ironically, this news comes on the heels
of AIG's "Thank You, America" TV ad campaign, which offers
gratitude for the government assistance.
- With Alcoa (
) slated to report fourth-quarter earnings after the close,
earnings season has unofficially begun. This quarter, companies
in the S&P 500 Index (SPX) are projected to report earnings
growth of 2.8%, up from the anemic 0.1% growth rate in the third
- The Consumer Electronics Show (CES) opened in Las Vegas last
night, and tech-sector analysts say to be on the lookout for
three themes. First, PC manufacturers will try and stage a
renaissance, spurred by touchscreen tablets. Meanwhile, mobile
companies will feature the smartphone as the nucleolus from which
users can control all aspects of their digital life. Finally,
those in the television business hope to convince consumers that
it's worth paying for bigger and brighter technology.
... Google (GOOG) is testing its free WiFi service in an area
populated by those who are probably already paying a monthly
Internet fee -- Manhattan's chic Chelsea neighborhood. This is one
step toward Mayor Michael Bloomberg's quest to be "the world's
leading digital city," with "universal access to high-speed
Internet." Under the terms of the deal, GOOG will absorb two-thirds
of the costs to build and maintain the network, while a nonprofit
neighborhood development group will pick up the rest. While Chelsea
isn't exactly a region where residents can't easily afford Internet
access, it is home to Google's NYC-based office.
Today's Top Tweet
"Don't trade out of boredom, have a plan and see it first. Days
like today are often best spent studying."
, 12:50 p.m.
5 Stocks We Were Watching Today
- Groupon (
) options traders are looking for a
over the next few weeks.
- Bank of America (BAC) was tagged with
at a pair of brokerage firms.
- Ford Motor (F) bulls traded a
in the January 2015 series.
- Short-term skeptics
focused their efforts
on Akamai Technologies (AKAM).
- Juniper Networks (JNPR) speculators switched gears,
buying to open
Question of the Day
: How can I determine if I will be assigned on my sold option?
: An option seller will typically not be assigned unless the
position is in the money at expiration. One (albeit not foolproof)
way to determine the odds of this outcome is by looking at the
option's delta, which gives a rough estimate of the percentage
chance a position has of being in the money by expiration. So an
option with a delta of positive or negative 0.2 has a 20% chance of
being in the money when the options expire. This is a general
method, however, as delta does not (and cannot) account for
unexpected dramatic moves in the underlying security.
For a look at today's options movers and commodities
activity, head to page 2.
Oil futures were little changed in Tuesday's session, with the
February contract edging down 4 cents to $93.15 per barrel. Gold
futures, however, mounted a strong advance, snapping their recent
losing streak. February-dated gold added $15.90, or 1%, to settle
at $1,662.20 an ounce.
At the end of every market day, the staff at Schaeffer's
Investment Research reviews the trading day in detail, covering
major events and key market developments. Don't miss this
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