Recent Rally at Risk as Dow Futures Drop 60 Points

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Following two days of triple-digit intraday moves on the Dow Jones Industrial Average (DJIA) , traders' fervor appears momentarily tempered heading into the session. With the seemingly bearish bias emanating from the Street, a few key technical indicators could play roles in Wednesday's market activity, including:

  • the 13,000 mark . Will today's projected market weakness pull the Dow back below this significant level?
  • the S&P 500 Index ( SPX ) , and looming overhead resistance at both its 20-day moving average and the 1,400 mark. Neither of these levels has been toppled since April 3.
  • the VIX . The "fear gauge" pulled below its 80-day moving average yesterday, a trendline not breached on a daily closing basis since April 12.
Among equities in focus, bears could be attracted by IBM's (IBM ) top-line miss, while options players were picking up near-term calls on Intel (INTC ) ahead of its first-quarter release.

And now, on to the numbers...

Dow, S&P and Nasdaq futures

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,198,061 call contracts traded on Tuesday, compared to 689,413 put contracts. The resultant single-session put/call ratio arrived at 0.58, while the 21-day moving average was 0.64.

NYSE and Nasdaq summary

Volatility indices

Currencies and Commodities

  • The U.S. dollar index is 0.3% higher this morning to trade at $79.78.
  • Crude oil is slightly south of breakeven heading into the session, with the front-month contract last seen at $104.59 per barrel.
  • Gold futures are lower, as well, with the malleable metal down 0.3% at $1,646.60 an ounce.

Currencies and commodities

In earnings news, IBM Corp. (IBM - 207.45) said its first-quarter profit improved 7.1% on a year-over-year basis to $3.07 billion, or $2.61 per share. Excluding items, operating earnings arrived at $2.78 per share, while revenue rose 0.3% to $24.67 billion. Analysts were calling for adjusted earnings of $2.65 per share on $24.78 billion in sales. In the most recent reporting period, short interest depleted 10.9%, and now accounts for a low 1.1% of the stock's available float. Some of these short sellers may be encouraged to climb back on board, with Big Blue down 2.3% ahead of the bell.

Intel (INTC - 28.47) banked a first-quarter profit of $2.74 billion, or 13 cents per share, down 13% from its year-ago earnings. On an adjusted basis, INTC earned 56 cents per share, while revenue increased 0.5% to $12.9 billion. Wall Street was looking for a profit of 50 cents per share on $12.84 billion in revenue. Ahead of last night's earnings, options players were optimistically aligned toward the stock, with INTC's Schaeffer's put/call open interest ratio (SOIR) of 0.69 ranking in the 9th percentile of its annual range. In other words, short-term speculators are more call-heavy than usual toward the equity. INTC is 3.1% lower in pre-market trading.

Yahoo (YHOO - 15.01) reported an adjusted first-quarter profit of 24 cents per share, while revenue rose 0.6% to $1.22 billion. Analysts, on average, had expected a profit of 17 cents per share on revenue of $1.06 billion. Looking ahead, YHOO is forecasting total second-quarter revenue of $1.17 billion to $1.29 billion, while Wall Street is predicting sales of $1.08 billion. YHOO is looking at a 4% jump right out of the gate. YHOO could struggle to overtake the $16 mark, as this strike is home to peak call open interest in the front-month series of options.

Intuitive Surgical (ISRG - 545.53) announced that its first-quarter profit ramped up 38% to $143.5 million, or $3.50 per share, as revenue jumped 28% to $495.2 million. The results sailed past analysts' consensus estimates for earnings of $3.14 per share on $464 million in revenue. ISRG is set to start the session with a 6% lead, which could prompt some of the 72% of brokers who maintain a "hold" or "sell" suggestion toward the stock to change their tune.

Earnings and Economic Data

The usual report on weekly crude inventories is due out today, and Wall Street will also hear the latest earnings from American Express ( AXP ), eBay ( EBAY ), Yum Brands ( YUM ), Marriott (MAR), Bank of New York Mellon (BK), BlackRock (BLK), Cubist Pharmaceuticals (CBST), F5 Networks (FFIV), Halliburton (HAL), Huntington Bancshares (HBAN), Qualcomm (QCOM), SLM Corp. (SLM), and VMware (VMW). Keep your browser at SchaeffersResearch.com for more news as it breaks.

Overseas Trading

On the other hand, European markets have turned lower at midday. Spain remains a sore spot, after the country's central bank reported that the ratio of bad loans on the books for the financial sector tagged a 17-year high of 8.2% in February. Meanwhile, utility issue Iberdola dropped after construction giant ACS unloaded a 3.7% stake in the company. At last check, the French CAC 40 is down 1.6%, the German DAX is 1% lower, and London's FTSE 100 is off 0.2%.

Overseas markets

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

Referenced Stocks: AXP , CBOE , EBAY , SPX , YUM

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