U.S. stock futures point toward a flat-to-lower open as expiration looms
by Joseph Hargett (jhargett@sir-inc.com) 6/18/2010 7:52 AM
Keywords: BPDJIASPXTHCstocksoptionscommoditiesetfcurrencyeconomyweekly
Following a sharp rally into the close on Thursday, the Dow Jones Industrial Average (DJIA) closed its third consecutive day above 10,400. What's more, the S&P 500 Index (SPX) logged its third close in a row above its 200-day moving average, continuing to build the case that Wall Street is finally emerging from a bull market correction. Trading today could be interesting, however; today is triple-witching Friday, as option expiration coincides with the expiration of stock index futures and stock index options. This triple expiration can create additional volatility for the market, though much of the repositioning doesn't arrive until the Monday morning following expiration. Heading into the open, futures on the DJIA and SPX are trading in a tight range, down 12 points and 1 point versus fair value, respectively, so plan accordingly.
In equity news, Standard & Poor's Ratings Services cut BP plc's (BP) long-term credit rating to A from AA-, keeping the company on a negative outlook. "The downgrade reflects our opinion of the challenges and uncertainties that BP continues to face in the aftermath of the explosion on the Deepwater Horizon rig in the Gulf of Mexico on April 20, 2010, and the subsea Macondo well blowout," said Simon Redmond, an S&P credit analyst.
Also on the ratings front, Moody's Investors Service upgraded the corporate and probability of default ratings for Tenet Healthcare Corp. (THC) to B2 from B3. Moody's said that the company's ratings outlook is stable. "The upgrade of Tenet's ratings reflects continued improvement in operating results, which was further supported by the company's recent announcement raising 2010 adjusted EBITDA guidance," said Moody's in a statement.
Earnings Preview
There are no earnings reports scheduled for release today. Keep your browser at SchaeffersResearch.com for more news as it breaks.
Economic Calendar
The economic calendar is devoid of reports today. Looking ahead, Monday's calendar is also clear, while May's existing home sales will arrive on Tuesday. As for Wednesday, weekly U.S. petroleum supplies will be overshadowed later in the day by the Federal Open Market Committee's interest rate decision. Thursday brings the usual weekly initial jobless claims, as well as May's durable goods orders. Finally, we round out next 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 1,191,990 call contracts traded on Thursday, compared to 817,352 put contracts. The resultant single-session put/call ratio arrived at 0.69, while the 21-day moving average held at 0.66.
**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.**
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Overseas Trading
Overseas trading is weak this morning, as only six of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 0.04%. Trading in Asia closed mixed, as Australian markets rallied on strength in the commodities sector, while Shanghai pulled back due to a round of profit taking. Meanwhile, European shares are pulling back from a one-month high, with weakness in the drug sector and oil producers leading the way lower. Overseas market information comes to you courtesy of Schaeffer's Daily Bulletin.
Currencies and Commodities
Trading activity is down across the board this morning, as weakness in stocks has not given rise to strength in the U.S. dollar or gold, both of which are typically seen as safe-haven investments. Specifically, the U.S. Dollar Index is trading flat in pre-market activity, perched at 85.69 at last check. Meanwhile, gold futures are heading lower, with the front-month contract off $1.60 at $1,247.10 in London. A pullback in gold may be expected today, as the malleable metal tagged a fresh all-time high of $1,248.70 on Thursday. Finally, crude futures are retreating alongside equities this morning, with the lead contract down 1.41% at $76.94 per barrel.
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.
Opening View: Can the DJIA Hold Support Amidst an Economic Storm?
(6/17/2010 7:53:45 AM)The Dow Jones Industrial Average (DJIA) cooled its heels yesterday, as traders digested Monday's impressive gains. Both the DJIA and the S&P 500 Index (SPX) held key support at their respective 200-day moving averages, lending credence to the belief that the recent bull market correction may finally be over. Heading into the open, the DJIA and the SPX are trading roughly 36 and 4 points above fair value, respectively, though there is a flood of economic data between now and the open that could impact these readings. On the upside, look for the DJIA to meet with resistance near 10,500, which is a 50% retracement of the Dow's April 26 high and June 8 low, while support is emerging near 10,350 on a short-term basis, and 10,200 on an extended decline. The SPX faces a similar set-up, with resistance at a 50% retracement of its April 26 high and May 25 low near the 1,130 level, while short-term support resides at 1,110, and 1,090 should a steep sell-off emerge.
Opening View: Are DJIA, SPX Finally Emerging from Correction? Or was Tuesday a Head Fake?
(6/16/2010 7:57:31 AM)Both the Dow Jones Industrial Average (DJIA) and the S&P 500 Index (SPX) vaulted above their respective 200-day moving averages yesterday, giving market technicians something to crow about. For the SPX, the 200-day trendline is often considered a demarcation point between bull and bear markets. As such, continued strength above this trendline by the SPX could be a sign that we are nearing the end of a bull market correction. Such strength remains to be seen, however, as early trading is hinting that yesterday's rally may have been a bit overdone, with futures on the DJIA and SPX trading roughly 45 and 6 points below fair value, respectively. Look for the Dow to find short-term support near 10,300, or 10,200 on a steeper sell-off, while the SPX could find a floor near 1,110, or 1,090 should the decline gain momentum. Finally, the CBOE Market Volatility Index (VIX) has plunged more than 30% since setting a near-term peak of 37.38 on Tuesday last week. The so-called fear index has pulled back to within striking distance of support in the 25 region, a level the VIX has not closed below since May 5.
Opening View: DJIA Bulls Will Try Again After Monday Smackdown
(6/15/2010 7:52:04 AM)Despite rallying more than 100 points early in the session, the Dow Jones Industrial Average (DJIA) flopped in afternoon trading, shedding roughly 20 points and closing back below the 10,200 level. The Dow continues to find resistance at its 10-month moving average, which is currently resting just below 10,300, while support can loosely be defined by the 10,000 and 9,800 levels. Meanwhile, the S&P 500 Index (SPX) was neatly rejected by its 200-day moving average on Monday. This trendline is currently hovering just below the 1,110 area, while support could emerge near the 1,080 or 1,060 levels. Heading into the open, we are seeing a positive bias similar to yesterday morning, with futures on the DJIA and the SPX trading 51 points and 6 points above fair value, respectively. Finally, I should point out that the end of the week brings about "triple witching," when equity options, stock index options, and stock futures contracts expire simultaneously. According to Todd Salamone in this week's Monday Morning Outlook, 71% of the 17 triple-witching expiration weeks since 2006 have produced positive returns, though only 40% of June triple-witching expiration weeks have been positive, with the average loss totaling about 2%."
Opening View: DJIA, SPX Bulls Seek Third Win in a Row; VIX Drops Below 30
(6/14/2010 7:54:55 AM)Market bulls are looking to extend their winning streak to three sessions in a row this morning, as futures on the Dow Jones Industrial Average (DJIA) are pointing toward a gain of about 59 points on the open. Similarly, the S&P 500 Index (SPX) is set for a gain of about 5 points at the start of regular trading. Last week saw the major market indexes set new annual lows, but a nearly 300-point rally on Thursday placed the DJIA back above the 10,000 mark, allowing the Dow to close above its 10-day and 20-day moving averages for the first time since May 3. However, the DJIA is still staring up at resistance in the 10,250-10,300 area, a region that could come into play early this morning if pre-market trading is any indication. Meanwhile, the SPX also closed above its 10-day and 20-day trendlines, but could find resistance in the 1,100 region. What's more, the index must also contend with its 200-day trendline in the 1,108 area. Finally, the CBOE Market Volatility Index (VIX) plunged below the 30 level on Friday, but the fear index could find support in the 28 area, which is home to its 10-week moving average.
Opening View: SPX Looking Up At 1,100 Again; Can DJIA Maintain Momentum?
(6/11/2010 7:22:03 AM)Traders are hoping to finish the week on the right foot this morning and keep up Thursday's positive momentum, which saw the Dow Jones Industrial Average log its third strongest session of 2010. By the end of trading, the Dow had added 273 points and reclaimed both its 20-day moving average and the 10,000 level. Nonetheless, the S&P 500 Index (SPX) is still looking up at potentially stiff resistance at the 1,100 leve1. The CBOE Market Volatility Index, meanwhile, is sitting right at the round-number 30 level following Thursday's nearly 10% decline. Looking ahead to today, traders will be focused on the release of May retail sales, business inventories, and the preliminary consumer sentiment report from the University of Michigan. Overseas trading is holding strong this morning, although U.S. index futures indicate a relatively flat open.
Opening View: DJIA Bulls Will Try Again to Mount Assault on 10,000
(6/10/2010 7:32:13 AM)The bulls will try to take the reins once again this morning, with futures on the Dow Jones Industrial Average up slightly above fair value. The bulls have been encouraged by better-than-expected Chinese exports and decisions by European central banks to keep interest rates at record lows. The bulls certainly gave it their best shot on Wednesday, rising by triple digits in the morning, but they ran out of steam by midday. The embattled euro backpedaled below the closely watched $1.20 level, sending the market reeling lower into the close, and the Dow shed more than 100 points. The Dow remains below the 10,000 level and is clinging to support in the 9,900 region. The S&P 500 Index is holding support at the 1,050 level at the moment. Also in the spotlight, BP plc (BP) plunged by more than 15%, to $29.20, a 13-year low, Wednesday on oil spill concerns.
Opening View: DJIA Faces Tough Resistance Ahead of Beige Book
(6/9/2010 6:46:34 AM)All eyes are on the Fed and Chairman Ben Bernanke today. Bernanke will testify before the House Budget Committee this morning, while the Fed will release its Beige Book, a snapshot of the economy, this afternoon. Bernanke on Monday delivered a relatively upbeat assessment of the economy, telling ABC he doesn't expect a double-dip recession. "So far the news is pretty good," said the Fed chief. "My best guess is that we'll have a continued recovery [but] it won't feel terrific," citing the weak employment picture. In sort of a delayed response, stocks staged a last-minute rally on Tuesday. In the end, the Dow Jones (DJIA) managed a triple-point gain, but remains below resistance at both the 10,000 level and its 10-day moving average. The S&P 500 Index (SPX) added 1.1%, finding support at the 1,040 level. Traders remain cautious this morning. In addition to the Beige Book, traders are looking at Europe, with the European Central Bank meeting Thursday and its leader delivering a speech today. At last check, DJIA and SPX futures are slightly above fair value. Finally, the CBOE Market Volatility Index (VIX) eased nearly 8%.
Opening View: DJIA Futures Modestly Higher; Indexes Search for Support
(6/8/2010 7:11:01 AM)Stocks wavered throughout trading in Monday, but finally settled on a loss as traders took their cues from the currency markets, where the euro continued to backpedal against the dollar. The Dow Jones Industrial Average backpedaled away from the psychologically significant 10,000 level as it shed more than 100 points. The Dow is now testing support in the 9,800 neighborhood, which contained its lows in early February. Meanwhile, the S&P 500 Index endured a drop of 1.4%. Right before the closing bell rang, the SPX found a foothold at the 1,050 level, which provided a floor for the index earlier this year. Fitch Ratings rattled traders in Europe after it said Great Britain's fiscal challenge is "formidable," and that the U.K. must tackle debt reduction in a serious way. Britain's new prime minister, David Cameron, on Monday warned that the nation must make severe spending cuts. "We have been living beyond our means," Cameron said in a major speech. Meanwhile, traders in the U.S. are looking forward to Wednesday's release of the Fed's Beige Book, a snapshot of the economy. Those traders remain cautious this morning after two days of sharp losses, although both the DJIA and the SPX are trading slightly above fair value. Finally, the CBOE Market Volatility Index (VIX) managed only a modest increase of 3% on Monday.
Opening View: Traders Cautious This Morning; VIX Soared 20 Percent on Friday
(6/7/2010 7:22:11 AM)Weaker-than-expected jobs data and growing overseas concerns pummeled the Dow Jones Industrial Average (DJIA) to a loss of more than 300 points on Friday. In fact, the Dow closed beneath the 10,000 level for only the third time since November 2009, extending its weekly decline to 2%. The blue-chip barometer wasn't the only one to give up round-number support; the S&P 500 Index (SPX) finished below the 1,100 level. Todd Salamone pointed out in this week's Monday Morning Outlook, that "In observing various sentiment indicators, pessimism has reached levels that have been consistent with bottoms during the past year. For example, the 10-day moving average of the International Securities Exchange's (ISE) all-equity call/put ratio is 1.52, which is around the level that preceded major bottoms in July 2009 and February 2010." However, Todd warned that pessimism may need to reach even more extreme levels than in the past considering the recent weakness in the market. Traders remain wary this morning after Friday's drop, with the DJIA and the SPX trading slightly above fair value. Finally, the CBOE Market Volatility Index (VIX) skyrocketed 20% on Friday to close back above its 10-day and 20-day moving averages.
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