Dow Heads Lower, Putting Late-Week Rally at Risk

As evidenced by yesterday’s late-session pullback, the bears are back in the building. Heading into the final session of the week, futures on the Dow Jones Industrial Average (DJI) are pointed modestly lower. It’s setting up to be a difficult day for all major market indexes, with futures on the broader S&P 500 Index (SPX) and NASDAQ-100 Index (NDX) following their big-cap brethren into the red.

And now, on to the numbers…

Market Statistics

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,053,644 call contracts traded on Thursday, compared to 674,855 put contracts. The resultant single-session put/call ratio arrived at 0.64, while the 21-day moving average was 0.76.

From the Trading Floor

On the technical front, Schaeffer’s Equities Analyst Bryan Sapp has his eye retrained on “the 1,333 mark on the SPX. This remains the level to get above for the bulls. On the lower end, 1,265 is the bottom of the range.”

“Schaeffer’s Senior Quantitative Analyst Rocky White does an overview of sentiment polls, and we combine them all to form an index,” Sapp continued. “One thing that struck me is there is rampant optimism in the dollar and in bonds, pessimism in oil — which is to be expected since oil is priced in dollars — and very little optimism toward stocks. For contrarian purposes, if the dollar fades, then the crowd will exit and seemingly drive stocks higher. As of late, indexes have been moving in lockstep with the euro, so a dollar fade/euro rally should spark an equity rally.”

Currencies and Commodities

In equities news, Molina Healthcare, Inc. (MOH – 17.77) is set to pop after Ohio reinstituted the health insurer as a Medicaid provider for the state’s low-income population. Ahead of last night’s announcement, 82% of analysts had slapped the stock with a “hold” or “sell” suggestion. MOH is up 23.8%% ahead of the bell.

In earnings news, Quiksilver, Inc. (ZQK – 2.44) said its second-quarter loss narrowed to $5.1 million, or 3 cents per share. Excluding items, ZQK recorded a per-share loss of 2 cents, while revenue inched up 3% to $492.2 million. The results fell short of Wall Street’s forecast for earnings of 1 cent per share on $496 million in sales. Options players were stockpiling calls ahead of earnings, with the equity’s 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio docked at a staggering 34.53.

More:

(1) Dow Heads Lower, Putting Late-Week Rally at Risk
URL: http://www.schaeffersresearch.com/commentary/content/ezines/dow%20heads%20lower%20putting%20late-week%20rally%20at%20risk/openingview.aspx?id=111454&c=obsfeed&category=Opening%20View



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