Opening View: DJIA Could Test 10,000 as Bears Solidify Control

By
A A A

The Dow Jones Industrial Average (DJIA) breached key support at the 10,200 level in late trading on Monday, potentially setting the blue-chip barometer for a sharp decline throughout this post-expiration week. On four of the prior five occasions that the DJIA first closed a session below 10,200, the venerable average has gone on to test or trade significantly below the psychologically important 10,000 mark. What's more, the S&P 500 Index (SPX) is also headed lower, with the broad-market index closing below former support at the 1,070 level on Monday. Heading into the open, futures on the DJIA and the SPX are trading 71 points and 8.4 points below fair value, respectively, indicating that Monday's late-session selling pressure could spill over into early trading this morning. Finally, if early indications carry over into the regular session, we could even see the CBOE Market Volatility Index (VIX) break out above resistance in the 27-28 region. The VIX has not traded above this region since July 6.

In equity news, Big Lots Inc. ( BIG ) posted second-quarter earnings of $38.9 million, or 48 cents per share, on revenue of $1.14 billion. Same-store sales were up 3.8% for the quarter. Big Lots said its gross margin improved by half a percentage point, helped by lower markdowns, which more than offset rising freight costs. Analysts were expecting earnings of 47 cents per share on sales of $1.13 billion. The company also lifted its full-year guidance to earnings of $2.82 to $2.90 per share for the fiscal year, compared to analyst expectations for $2.85 per share.

Finally, Medtronic Inc. ( MDT ) reported that its first-quarter earnings rose 87%, to $830 million, or 76 cents per share. On an adjusted basis, the company said it earned $868 million, or 80 cents per share. Net sales dipped to $3.77 billion, from $3.93 billion a year ago. Analysts had expected the company to earn 82 cents per share on revenue of $3.97 billion.


Earnings Preview

On the earnings front, Barnes & Noble Inc. ( BKS ), Burger King Holdings Inc. ( BKC ), Trina Solar Limited ( TSL ), and VeriFone Systems Inc. ( PAY ) are scheduled to release its quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

July's existing home sales data is the lone piece of economic news hitting the Street today, while tomorrow offers up July's durable goods orders, new home sales, and the weekly report on U.S. petroleum supplies. 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 1,531,594 call contracts traded on Monday, compared to 595,272 put contracts. The resultant single-session put/call ratio arrived at 0.39, while the 21-day moving average slipped to 0.63.

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

Click here for the new summer issue of SENTIMENT magazine

Overseas Trading

Overseas trading is struggling this morning, as only one of the 10 foreign indexes that we track is in positive territory. The cumulative average return on the collective stands at a loss of 0.79%. In Asian trading, regional indexes finished broadly lower, with Japan leading the decline as the yen's unabated advance applied significant pressure to exporters. The Japanese Nikkei Stock Average breached the 9,000 level to end at a 15-month low, dipping into what many technicians believe is bear-market territory. In Europe, mining and energy-related stocks are leading a broad regional decline, despite news that industrial orders rose 2.5% in the euro zone during June - up 22.6% over the same month last year.

Overseas markets

Currencies and Commodities

The yen continues to be the currency to watch in global trading, as the Japanese currency tagged a 15-year high versus the U.S. dollar, despite strong words against the currency's continued appreciation from Japanese Finance Minister Yoshihiko Noda. Japan hasn't intervened in the currency markets in about five years, but Noda threatened to do just that in order to keep the yen's rise in check. Despite weakening against the yen, the U.S. dollar remains strong across the board versus the rest of its major competitors, sending the U.S. Dollar Index 0.38% higher to 83.45 - the index's highest level since July 21.

Commodities, which trade inversely to the greenback, have been hammered by the renewed strength in the dollar. In Asian trading, crude futures continued their recent decline, slipping 81 cents to $72.29 per barrel - near a three-month low. Finally, gold is retreating in London trading, with the lead contract pulling back $8.80 to $1,219.70 an ounce after the malleable metal hit a one-month high on Monday.

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.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: BIG , BKC , BKS , CBOE , MDT , PAY , TSL

Schaeffer's Investment Research

Schaeffer's Investment Research
  • See all for Schaeffer's Investment Research
  • View Print Version

More from Schaeffer's Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

100,376,898
  • $17.62 ▲ 0.51%
83,231,837
  • $25.62 ▲ 1.91%
75,739,329
  • $111.78 ▼ 0.77%
65,297,937
  • $36.37 ▼ 1.76%
59,053,093
  • $47.66 ▲ 0.29%
53,482,350
  • $2.59 ▼ 0.38%
51,504,284
  • $7.34 ▲ 2.37%
51,434,656
  • $8.14 ▲ 6.96%
As of 12/19/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com