Opening View: DJIA, SPX Threaten Key Support Levels, VIX Targets 35 Level

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The Dow Jones Industrial Average ( DJIA ) gave up a 90-point lead yesterday to close down 115 points, as bullish investors were overwhelmed by a wave of late-session selling pressure. The Dow's decline found support at the 10,500 level, but, given the direction of futures this morning, we could see the DJIA head sharply lower, potentially breaching short-term support at 10,450 and the average's 160-day moving average. Speaking of 160-day trendlines, the S&P 500 Index ( SPX ) is either in the process of setting a near-term bottom , or breaking out below key long-term support. The SPX closed yesterday perched on this trendline, which is located in the 1,120 area. The next layer of potential support lies at 1,110, while long-term and psychological support resides at 1,100. Heading into the open, futures on the DJIA and the SPX are trading roughly 70 points and 11 points below fair value. Finally, the CBOE Market Volatility Index ( VIX ) has held above the 30 level and its 10-day moving average for the past three sessions. The so-called "fear" index rallied nearly 10% on Tuesday, and could challenge short-term resistance at the 35 level in today's trading.

In earnings news, Deere & Co. ( DE ) reported a second-quarter profit of $547.5 million, or $1.28 per share. On an adjusted basis, earnings were $1.58 per share, topping analyst expectations. Sales in the period rose 6% to $7.13 billion. For the full year, Deere said it expects net income of $1.3 billion. Heading into the open, DE has gained more than 2% in the wake of its quarterly report.

Elsewhere, Hewlett-Packard Co. ( HPQ ) reported a second-quarter profit of $2.2 billion, or 91 cents per share, as revenue rose to $30.8 billion. Adjusted income was $1.09 per share. Analysts expected earnings of $1.05 per share on revenue of $29.8 billion. HPQ shares have rallied 2.80% in pre-market activity.


Finally, BJ's Wholesale Club Inc. ( BJ ) said that its first-quarter profit rose to $26.1 million, or 49 cents per share, as sales rose 13% to $2.55 billion. Excluding gasoline sales, same-store sales rose 4.2%. The company raised its full-year forecast to $2.58 to $2.68 per share. Analysts were looking for first-quarter results of 44 cents per share and full-year guidance of $2.61 per share. In electronic trading, BJ is up 0.13%.

Earnings Preview

On the earnings front, Applied Materials Inc. ( AMAT ), Hot Topic Inc. ( HOTT ), and Limited Brands Inc. ( LTD ) are slated to release their quarterly earnings reports. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

CPI

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,527,969 call contracts traded on Tuesday, compared to 994,570 put contracts. The resultant single-session put/call ratio arrived at 0.65, while the 21-day moving average rose to 0.60.

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

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.

Overseas Trading

Overseas trading is abysmal this morning, as none of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 1.81%. In Asia, stocks retreated as moves to toughen financial regulation in both the U.S. and Europe rattled markets and sapped investors' appetite for risk. Investors were also unnerved by news Germany had moved to ban naked short-selling in certain securities, which triggered a sharp slide in the euro. The tighter regulation in German has slammed European trading as well. Analysts said there were concerns the ban would restrict the ability of markets to manage risk and hedge positions. A broader euro zone-wide ban could result in funds and business draining away from Frankfurt to London and other global financial centers, analysts noted. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin .

Overseas markets

Currencies and Commodities

The U.S. Dollar Index has rallied to an annual high above the 87 level this morning, as the greenback gained strength in the wake of a four-year low in the euro. At last check, the index was up 0.15% at 87.30. Commodities are suffering under the weight of a rising dollar, with crude futures falling $1.04 to $71.66 in electronic trading. What's more, the combination of a rising dollar and falling euro has pressured gold futures $7.70 lower to $1,206.90 an ounce. If this weakness continues, gold may be in danger of breaching the psychologically important 1,200 level.

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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