Opening View: RUT Breaks Support, as Small Caps Follow DJIA, SPX Lower


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Yesterday saw another 145 points spiral down the drain for the Dow Jones Industrial Average ( DJIA ), as the blue-chip barometer succumbed to fears about a drawdown in the retail sector. If you are looking for technical support, the Dow could find short-term ballast in the 10,100 area, while the 10,000 remains a key psychological backstop. As for the S&P 500 Index ( SPX ), look for short-term support near 1,065, with the May 2010 lows of 1,040 a key level for the bulls to hold. On a side note, I find it interesting that despite the volatility of the past several weeks, the SPX has offered up very little net directional movement. Specifically, the index closed at 1,071.59 on May 20, and enters today trading at 1,073.69. On the futures front, the DJIA and SPX are trading 14 points and 2 points above fair value, respectively, heading into the open. Finally, the small-cap focused Russell 2000 Index ( RUT ) became the latest major market index to breach its 200-day trendline. Small caps have led Wall Street's rebound out of this economic morass, and the RUT's dip below this key technical moving average is yet another warning sign for bullish investors.

In earnings news, Research In Motion Limited ( RIMM ) said that its first-quarter net income soared 20% as the BlackBerry maker shipped 11.2 million handsets. RIMM reported a profit of $768.9 million, or $1.38 per share, with revenue jumping 24% to $4.24 billion. Analysts were looking for earnings of $1.35 per share, on revenue of $4.35 billion. Looking ahead, RIMM predicted adjusted earnings of $1.33 to $1.40 per share, on revenue ranging from $4.4 billion to $4.6 billion. Wall Street is currently forecasting a profit of $1.32 per share on revenue of $4.52 billion. Finally, the company also said it will repurchase up to 31 million shares during the next 12 months. In pre-market trading, RIMM has plunged more than 5% following the report.

Finally, Oracle Corp. ( ORCL ) said its fourth-quarter net income rose to $2.4 billion, or 46 cents per share, as revenue rose 39% to $9.5 billion. Excluding special items, Oracle said earnings for the quarter were 60 cents per share. Analysts had expected earnings excluding items of 54 cents per share, and $9.5 billion in revenue. In electronic trading, ORCL is up more than 4.6%.

Earnings Preview

On the earnings front, KB Home ( KBH ) is the lone company heading into the earnings confessional today. Keep your browser at for more news as it breaks.

Economic Calendar

The economic calendar rounds out the week with the initial third-quarter gross domestic product reading and June's final University of Michigan consumer sentiment index.

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 969,164 call contracts traded on Thursday, compared to 795,712 put contracts. The resultant single-session put/call ratio arrived at 0.82, while the 21-day moving average held at 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

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Overseas Trading

We are seeing heavy losses across the board in overseas trading this morning, as none of the 10 foreign indexes that we track are in positive territory. What's more, the cumulative average return on the collective stands at a loss of 0.84%. In Asia, stocks struggled, with traders concerned about emerging cracks in an already tenuous global economic recovery. Furthermore, stocks in Tokyo were hit hard due to concerns that the yen would continue to rally against its foreign rivals. Turning to Europe, trading is down, with the indexes hitting a two-week low ahead of the weekend G20 meeting. Meanwhile, BP has tagged a 14-year low as it struggles to clean up the Gulf of Mexico oil spill. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin .

Overseas markets

Currencies and Commodities

Continued global weakness has driven demand for the U.S. dollar this week, despite China's pledge to allow the yuan a little more wiggle room in terms of appreciation. In pre-market trading this morning, the U.S. Dollar Index is rebounding from lows in Asian trading, rising 0.29% to 85.99. Meanwhile, gold futures are showing signs of early weakness, with the front-month contract slipping $1.40 to $1,244.50 and ounce in London. Finally, crude futures are also lower, with the lead contract down 22 cents at $76.29 per barrel.

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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