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Opening View: DJIA, SPX Search For Direction; Has Storm Passed?

Posted
5/12/2010 7:43:00 AM
By: Schaeffer's Investment Research
Referenced Stocks:DIS;SPX;VIX;CBOE;CSCO;DIS;DJIA;DRYS;ERTS;M;SPX;VIX;WFMI

While the Dow Jones Industrial Average ( DJIA ) was up more than 90 points at one point on Tuesday, the bulls were unable to hold onto the lead. The DJIA was bound by short-term resistance in the 10,850 area (home to its 10-day moving average) and support at the 10,700 level. Barring any major developments -- today is shaping up to be pretty quiet -- these levels should define the DJIA's trading range. Meanwhile, the S&P 500 Index ( SPX ) found support at the 1,150 level, while resistance materialized in the 1,170 area and the index's 10-day trendline. Heading into the open, futures on the DJIA and the SPX are trading about 19 points and 2.3 points above fair value. Speaking of trading ranges, the CBOE Market Volatility Index ( VIX ) has settled in between the round-number 30 level and its 10-day trendline during the prior two sessions. The VIX is also on course to close its third consecutive week above its 10-week and 20-week moving averages, a feat last accomplished in early February.

In earnings news, The Walt Disney Co. ( DIS ) said that its second-quarter net income was $953 million, or 48 cents per share, on sales of $8.58 billion. The company cited nearly $1 billion in box-office receipts from "Alice in Wonderland" for its stronger-than-expected report. Speaking of which, analysts had expected earnings of 45 cents per share on sales of $8.39 billion. However, DIS was last seen 2.18% lower in pre-market trading.

Elsewhere, Electronic Arts Inc. ( ERTS ) said it swung to a fourth-quarter profit of $30 million, or 9 cents per share. Excluding the effect of deferred sales of certain games, as well as stock options, the company said it would have earned $23 million, or 7 cents per share. Excluding deferred sales, net revenue was $850 million. Analysts were expecting net revenue of $835.4 million with earnings of 5 cents per share. Investors are not very happy with ERTS results, sending the stock down more than 4% in pre-market trading.

Finally, be sure to check out our Trading Floor Blog today and tomorrow, as my colleague Elizabeth Harrow is filing live reports from the Schaeffer's booth on the floor of the Las Vegas Money Show.

Earnings Preview

On the earnings front, Macy's Inc. ( M ), Cisco Systems Inc. ( CSCO ), DryShips Inc. ( DRYS ), and Whole Foods Market Inc. ( WFMI ) are slated to release their quarterly earnings reports. Keep your browser at SchaeffersResearch.com for more news as it breaks.

Economic Calendar

Market Statistics

Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,430,894 call contracts traded on Tuesday, compared to 977,761 put contracts. The resultant single-session put/call ratio arrived at 0.68, while the 21-day moving average rose to 0.55.

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 has a positive bias this morning, as seven of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.42%. In Asia, the various markets finished mixed, amid persistent worries about the euro zone's fiscal health. Meanwhile, European shares bounced back in morning trading, as strong banking results boosted financial shares, while tough austerity measures announced by Spain provided some relief to jittery investors. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin .

Overseas markets

Currencies and Commodities

Safe-haven buying and fears of growing inflationary risks have provided a boost for gold prices this week. After tagging a fresh all-time high of $1,220.03 in U.S. trading on Tuesday, gold futures have rocketed $20.60 higher in London to trade at $1,240.90 an ounce. Meanwhile the U.S. dollar has hit a snag this week, as the euro and the British pound have benefited from stabilization in the region, following the Greek bailout and the selection of David Cameron as the new British Prime Minister. At last check, the U.S. Dollar Index was up a mere 5 cents at $84.52. Finally, crude futures are headed lower this morning on supply concerns ahead of this morning's report on U.S. petroleum supplies. Heading into the open, crude futures are down 23 cents at $76.12 per barrel in electronic trading.

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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