Opening View: How Long Can DJIA Bulls Defend 10K?

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The Dow Jones Industrial Average (DJIA) dropped 134 points on Tuesday to close at its lowest level since July 7. However, the blue-chip barometer held psychological support at the 10,000 level, as market bulls came out early in defense. However, if today's economic reports on new home sales and durable goods miss the mark, DJIA bulls could be kissing goodbye to 10K and potentially saying hello to 2010's lows near 9,600 in short order. As for the S&P 500 Index (SPX), the broad-market index is trading just above potential support near 1,045, though a poor round of economic data could have a chilling effect. Heading into the open, Wall Street doesn't look too optimistic, with futures on the DJIA and the SPX trading about 26 points and 2.6 points below fair value, respectively. Finally, the CBOE Market Volatility Index (VIX) broke out to a two-month high on Tuesday, and is threatening to close above short-term resistance in the 28 region. As I have said before, a continued rise in the VIX does not bode well for the equities market.

In equity news, Toll Brothers Inc., ( TOL ) said that it swung to third-quarter profit of $27.3 million, or 16 cents per share, from a loss of $472.3 million, or $2.93 per share, last year. Revenue slipped to $454.2 million from $461.4 million a year ago. Analysts were looking for a loss of 14 cents per share on revenue of $392.9 million.

Elsewhere, Pacific Sunwear of California Inc. ( PSUN ) said that its second-quarter loss widened to $23.5 million, or 36 cents per share, from $14.2 million, or 22 cents per share, a year ago. Excluding one-time items, the company would have reported a loss of 22 cents per share. Revenue fell to $218.3 million from $242.8 million in the year-ago period. Analysts estimated a loss of 23 cents per share on revenue of $213.3 million.


Earnings Preview

On the earnings front, American Eagle Outfitters ( AEO ), Guess?, Inc. ( GES ), JDS Uniphase Corp. ( JDSU ), and TiVo Inc. ( TIVO ) are scheduled to release their quarterly earnings reports today. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

The economic calendar offers up July's durable goods orders today, as well as 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 1,055,972 call contracts traded on Tuesday, compared to 774,594 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

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Overseas Trading

Overseas trading looks 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 0.90%. In Asia, regional indexes attempted a rebound, but were smacked lower in late trading, with the Japanese Nikkei narrowly avoiding a 2% loss on the day. China's Shanghai wasn't as lucky. The rising yen remains Japan's biggest concern, as the currency hit a 15-year high versus the U.S. dollar on Tuesday, sapping strength from the country's exporters. Despite generally positive economic data, European markets are also headed broadly lower. Germany's Ifo business-sentiment index climbed to its highest level since mid-2007, but this was largely overshadowed by Standard & Poor's downgrade of Ireland's credit ratings.

Overseas markets

Currencies and Commodities

After closing at an 11-week low on Wednesday, oil prices regained some of that ground in Asian trading due to a spot of weakness in the U.S. dollar. Crude is holding onto some of that ground in electronic trading state-side, with the front-month contract rising 0.29% to $71.84 per barrel. Speaking of the U.S. dollar, the greenback took a breather in overnight trading, as traders repositioned themselves in the euro and the yen. However, the U.S. Dollar Index appears to be headed higher once again this morning, gaining 0.17% to trade at 83.29 at last check. Finally, gold futures have gained $5.50 in to trade at $1,238.90 in London - an eight-week high for the malleable metal.

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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