Opening View: DJIA Bulls Look to Bounce Back on Deal-Making Spree

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The Dow Jones Industrial Average (DJIA) has pulled back roughly 4.7% since peaking near 10,720 in mid-August. While the DJIA closed out last week with a 60-point drop on Friday, the blue-chip barometer closed off its session lows, and comes into this week trading above potential support near 10,200. Meanwhile, the S&P 500 Index (SPX) held at the 1,070 level on Friday, though the broad-market index is once again staring up at potentially stiff resistance in the 1,100 region. Heading into the open, futures on the DJIA and SPX are trading about 38 points and 5.5 points above fair value, respectively, pointing toward a positive start to the session. Finally, the CBOE Market Volatility Index (VIX) remains somewhat in check, with the index closing above its 10-week trendline for a second week in a row, but unable to surmount its 20-week moving average in the 27 area. If the VIX were to move lower from this point, it could be bullish for the market. That said, we are entering a post-expiration week, which could be fraught with headwinds as investors work to re-establish hedges that expired last week.

Wheeling and dealing is dominating the equities landscape this Monday morning. First up, Potash Corp. of Saskatchewan ( POT ) once again urged shareholders to reject BHP Billiton Plc.'s ( BHP ) $40 billion unsolicited bid. Potash said that it's been contacted by and has reached out to a "number of third parties who have expressed an interest in considering alternative transactions."

Meanwhile, Hewlett-Packard Co. ( HPQ ) has outbid Dell Inc. ( DELL ) for 3PAR Inc. ( PAR ), offering $24 per share for PAR, a 33.3% premium to Dell's offer of $18 per share. H-P hopes the deal will close by the year's end.

Finally, HSBC Holdings plc ( HBC ) has entered into exclusive talks to acquire a majority stake in Nedbank Group Ltd. from U.K. insurer Old Mutual plc. HSBC stated that talks are in progress and that any deal would be subject to conditions including regulatory clearances. The Financial Times reported Sunday that HSBC was set to win the bidding for a 52% holding in Nedbank, South Africa's fourth-largest lender.

Earnings Preview

On the earnings front, Focus Media Holding Limited ( FMCN ) is scheduled to release its quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

There are no major economic reports scheduled for release today. Tomorrow offers up July's existing home sales data. On Wednesday, July's durable goods orders, new home sales, and the weekly report on U.S. petroleum supplies will hit the Street. Weekly initial jobless claims will arrive on Thursday, while Friday rounds out the week with a second look at second-quarter U.S. gross domestic product and the final reading on the University of Michigan's August consumer sentiment index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,331,720 call contracts traded on Friday, compared to 967,871 put contracts. The resultant single-session put/call ratio arrived at 0.73, while the 21-day moving average rose to 0.64.

Volatility indices

NYSE and Nasdaq summary

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Dow, S&P and Nasdaq futures

Live From San Francisco: Senior Equities Analyst Andrea Kramer live blogged from the Schaeffer's booth at the San Francisco Money Show this week. If you didn't' catch it, you missed out on Steve Forbes and his three-step approach for resuscitating the American economy, including his opinion on the U.S. dollar, the federal tax code, and "Obamacare." Click here to check it out.

Overseas Trading

Overseas trading is mixed, as six of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.19%. Asian markets closed broadly lower, with Japan once again leading the decline as concerns grew that authorities may not step in and prevent a continued rise in the yen. Elsewhere, mining stocks were standouts, as shares gained after Australia's weekend election failed to produce a clear winner. Deal making is helping to lift sentiment in the euro zone, sending European markets higher. Specifically, Old Mutual rose nearly 5% after HSBC Holdings said it's in talks to acquire a majority stake in Old Mutual's Nedbank Group.

Overseas markets

Currencies and Commodities

With the euro struggling to move higher, the U.S. Dollar Index is once again flirting with resistance near its 10-week moving average. The greenback has pulled back a bit in early European trading, with the index down 0.11% at $82.97. Commodities have garnered some strength from this pullback in the dollar, with the front-month crude contract up 28 cents at $74.10 per barrel. Finally, gold is trading essentially flat, rising 50 cents to trade at $1,229.30 an ounce in London.

Currencies and commodities

Unusual Put and Call Activity:

For an explanation of how to use this information, check out our Education Center topics on Option Volume and Open Interest Configurations .

Unusual options activity - puts

Unusual options activity - calls

Every morning, our research staff analyzes the prior day and the overnight markets, and monitors the morning wires to give you an accurate preview of the day to come. If you enjoyed today's edition of Opening View, sign up here for free daily delivery, straight to your inbox, before the opening bell.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options


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