Opening View: DJIA, SPX Set to Extend July's Bull Run into August

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After surging ahead more than 7% in July, the Dow Jones Industrial Average (DJIA) appears poised for more of the same in August, with futures on the blue-chip barometer pointing toward an opening jump of more than 100 points. European and Asian economic data have provided the spark for Wall Street bulls, with stronger-than-expected manufacturing data out of the euro-zone lifting sentiment, while a contraction in manufacturing in China has sparked rumors that Beijing will hold off on tightening measures. The DJIA comes into August hovering above support at the 10,450 level, with a rally today potentially carrying the venerable average into resistance near the 10,550-10,600 area. Meanwhile, the S&P 500 Index (SPX) is riding into August with support in the 1,100 area, but the broad-market index must still contend with resistance in the 1,115 region, which is home to its 200-day moving average. Finally, the CBOE Market Volatility Index (VIX) is once again poised for a showdown with its 200-day trendline. For more on the significance of the VIX's relationship with this long-term moving average, read Bernie Schaeffer's thoughts on the subject from the August edition of the Option Advisor .

In equity news, Humana Inc. ( HUM ) reported second-quarter net income of $340.1 million, or $2.00 per share, as revenue rose to $8.38 billion. Analysts were expecting a profit of $1.60 per share, on revenue of $8.54 billion. The company also boosted its full-year profit outlook to a range of $5.65 to $5.75 per share, up from prior guidance for earnings of $5.55 to $5.65 per share.

Elsewhere, HSBC Holdings PLC ( HBC ) posted a first-half net profit of $6.76 billion as loan impairments and other provisions fell to their lowest level since the start of the financial crisis. Excluding one-time gains, underlying pretax profit rose 30% to $9.6 billion. Analysts had been expecting pretax profit of $9.3 billion. The bank said loan impairments and other charges fell to $7.52 billion. What's more, HBC declared a dividend of 16 cents per share for the period.

Finally, the United Arab Emirates announced over the weekend that it plans to stop Research In Motion Limited's ( RIMM ) BlackBerry services in October. According to the UAE, the move is due to a dispute over RIMM's handling of electronic data. Saudi Arabia has also said that it will suspend BlackBerry messaging services.

Earnings Preview

On the earnings front, Loews Corp. ( L ), MannKind Corp. ( MNKD ), Aflac Inc. ( AFL ), Evergreen Solar Inc. ( ESLR ), General Cable Corp. ( BGC ), SBA Communications Corp. ( SBAC ), and Verisign Inc. ( VRSN ) are scheduled to release their quarterly earnings report today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The Commerce Department will release its construction spending report for June on Monday. We'll also get a look at the Institute for Supply Management ( ISM ) Index for June. The Commerce Department will weigh in again on Tuesday morning with reports on personal income, personal spending, and factory orders for June. We'll learn about July auto sales in the afternoon. The market will be graced with the weekly report on U.S. petroleum supplies on Wednesday, along with the ISM services index, but the Street will likely pay the most attention to the ADP report on private sector employment, the first of three days worth of employment data. The weekly report on initial jobless claims will be released on Thursday. On Friday, the Labor Department will release the month's highly anticipated nonfarm payrolls and unemployment reports.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 853,188 call contracts traded on Friday, compared to 535,429 put contracts. The resultant single-session put/call ratio arrived at 0.63, while the 21-day moving average held at 0.61.

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

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Overseas Trading

Overseas trading is in fine shape this morning, as all 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 1.54%. In Asia, soft Chinese manufacturing activity in July prompted speculation that Beijing would put plans to rein in growth on hold. Specifically, the HSBC China Manufacturing Purchasing Managers Index dropped to a 49.4 reading in July from 50.4 in June, marking the first decline below the 50 level in 16 months. Meanwhile, European regional indexes are headed sharply skyward, as traders react to stronger-than-expected manufacturing data for the euro-zone. The Markit Euro-Zone Manufacturing Purchasing Managers Index rose to a reading of 56.7 in July from 55.6 in June, topping the preliminary estimate of 56.5. The figure was the highest in three months, and was driven by a surge in German production.

Overseas markets

Currencies and Commodities

The U.S. Dollar Index has broken yet another potential support level in Asian trading this morning, with the index dipping below the 81.50 level for the first time since April 27. At last check, the index was off 0.20% at 81.38 in pre-market trading. Meanwhile, crude futures have rebounded from a low near $77 per barrel in overnight trading, with the front-month contract up 74 cents at $79.69 per barrel. Keep in mind that the $79-$80 region has provided a stiff ceiling for crude futures since May 5. Finally, gold futures have dropped $3.20 to trade at $1,180.70 an ounce in London. The malleable metal is trading above its 10-day moving average, but the contract is meeting with resistance in the $1,185 area.

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

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This article appears in: Investing , Options


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