Dow Adds 85, SPX Highest Since Early April as Bulls Lead a Sleepy Street

Posted

Referenced Stocks:ADBE;CBS;CSCO;KFT;WMT

"It's undoubtedly clear that the past week and a half has been pretty unexciting," said Schaeffer's Senior Technical Strategist Ryan Detrick. "But after today, everyone is scratching their heads as to why exactly we just rallied. The reason can be found in some words of wisdom that are older than most of us reading this: never short a dull market." Today's upswing pushed the Dow Jones Industrial Average (DJI) decidedly higher today; at its intraday peak, the blue-chip barometer was up more than 104 points.

Keep reading to see what else was on our radar today:

• Options activity is heating up on 3 big-name stocks .
• Contrarians could find a bullish play with CBS Corporation ( CBS ).
• Plus, bond markets and the next move higher for equities .

And now, a look at the numbers...

The Dow Jones Industrial Average (DJI - 13,250.11) soared as high as 13,269.35 today -- its best price in three months. By the closing bell, the Dow pared its gain slightly, and ended the session up 85.3 points, or roughly 0.7%. This marked the index's loftiest daily settlement since May 2. Twenty-three of the 30 components posted wins, with a 9.6% earnings-induced rise for Cisco Systems, Inc. ( CSCO ) leading the way. On the other hand, Wal-Mart Stores, Inc. ( WMT ) paced the underperforming issues with a 3.1% loss. Kraft Foods Inc ( KFT ) remained at breakeven.

The S&P 500 Index (SPX - 1,415.51) and Nasdaq Composite (COMP - 3,062.39) also advanced in today's action. While the SPX turned in a roughly 10-point, or 0.7%, uptick, the tech-rich COMP rocketed 31.5 points, or 1%. This was the highest daily close for the SPX since April 2, and the COMP's best daily perch since April 27.

The CBOE Market Volatility Index (VIX - 14.29) pulled back 2.3% today, finding a foothold just above its intraday low of 14.28. This makes five consecutive sessions underneath the 15 mark for the VIX.

Today's highlight : "Housing stocks kicked some butt today, even though there was some disappointing housing data this morning," remarked Detrick. "We've been bullish on this group all year, and to see it shake off bad news is a very upbeat sign for the group -- maybe even the entire market as a whole."

Ryan continued: "Also, I love to see small caps lead. They've lagged most of the summer, but since August started they've taken the driver's seat. This is just one more sign that this rally could still have some legs."

Turning to today's major market stories...

• Can the iShares Barclays 20+ Year Treasury Bond Fund (NYSEARCA:TLT) give any clues about the market's next move? Schaeffer's Equities Analyst Bryan Sapp explains more.
• Option Trends : Adobe Systems ( ADBE ), Carnival (CCL), and Juniper Networks (JNPR).
• One options speculator rolled his bullish contracts up and out on Sprint Nextel Corporation (S) , while put players repositioned their bets on Advanced Micro Devices, Inc. (AMD) .
• Internet-based businesses salesforce.com, inc. (CRM) and SINA Corporation (USA) (SINA) were targeted for analyst adjustments today.
• A bull call spread was implemented on American International Group, Inc. (AIG).
• Rising put volume could have bullish implications for Barnes & Noble, Inc. (BKS) .
• Does uptrending CBS Corporation ( CBS ) have room to run higher?
• Highs & Lows : Groupon Inc (GRPN) and PetSmart, Inc, (PETM) saw record-breaking action today.
• An inverse head-and-shoulders pattern could be taking shape in the iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) .

For today's activity in commodities, options, and more, head to page 2.

Crude futures saw their third consecutive up day, as the dollar drifted lower and speculators mulled supply worries from the North Sea and heightened tensions in the Middle East. Even as the White House said it could soon revisit plans to release strategic oil reserves, oil for September delivery jumped $1.27, or 1.4%, to land at $95.60 a barrel. This marked the commodity's highest daily settlement since May 11.

Gold futures made it two wins in a row today, as comments from China's premier buoyed hopes for stimulus for the world's second-largest economy. Gains were limited, however, following a report from the World Gold Council that showed global demand for the precious metal dropped a year-over-year 7% in the second quarter. By the close, December-dated gold rose $12.60, or 0.8%, to settle at $1,619.20 an ounce.

Levels to watch in trading...

• Dow Jones Industrial Average (DJI - 13,250.11) - support at 11,500; resistance at 14,000
  
• S&P 500 Index (SPX - 1,415.51) - support at 1,100; resistance at 1,500
  
• Nasdaq Composite (COMP - 3,062.39) - support at 2,400; resistance at 3,400

Click through to read coverage of today's notable annual highs and lows .

At the end of every market day, the staff at Schaeffer's Investment Research reviews the trading day in detail, covering major events and key market developments. Don't miss this critical, timely and insightful report. If you enjoyed today's edition of Market Recap, sign up here for free daily delivery straight to your inbox.