Opening View

Dow Jones Industrial Average Looks North as Taper Talk Builds

Looking at the levels of interest on the SPX

by 12/18/2013 8:32:10 AM
Stocks quoted in this article:

The Dow Jones Industrial Average (INDEXDJX:.DJI) is poised to resume its uptrend today, with futures pointed higher ahead of the bell. In morning action, investors will have the chance to evaluate a round of delayed housing starts. However, the day's focus will likely be centered on the Federal Reserve, as Wall Street contemplates whether or not the central bank will announce a tapering to its asset-buying program when Chairman Ben Bernanke takes the stage this afternoon.

Meanwhile, "The levels of interest on the S&P 500 Index (SPX) continue to be 1,800, 1,780, and 1,770," said Schaeffer's Senior Trading Analyst Bryan Sapp. "Given that today is the Federal Open Market Committee (FOMC) policy statement release, it's very likely that we'll get a significant move that will break one of these levels, and signal the next trend into year's end."

Plus, our Trading Topic of the Week -- Trading Low-Priced Options: DON'T be tempted by the cheapest option available. It may seem like a good idea to keep your entry costs low by purchasing the lowest-priced option available. However, bear in mind that the cheapest contracts are most likely to expire worthless.

And now, on to the numbers...

Dow Jones Industrial Average, S&P and Nasdaq futures

Futures on the Dow Jones Industrial Average (INDEXDJX:.DJI) are nearly 40 points above breakeven.

Market Statistics

The Chicago Board Options Exchange (CBOE) saw 1,052,970 call contracts traded on Tuesday, compared to 561,173 put contracts. The resultant single-session put/call ratio rose to 0.53, while the 21-day moving average dipped to 0.56.

NYSE and Nasdaq summary

Volatility indices

From the Trading Floor

"There is a big skew in CBOE Volatility Index (INDEXCBOE:VIX) and iPath S&P 500 VIX Short-Term Futures ETN (VXX) calls, when compared to the implied volatility of puts," continued Sapp. "This is typical of the action ahead of a Fed day, but the current skew is bigger than the historical norm. To me, this is showing that taper fears are a bit excessive, and could lead to an outsized move higher, should we get no surprises today."

Currencies and Commodities

  • The U.S dollar index is up 0.07% in pre-market trading to linger near 80.12.
  • Crude oil, meanwhile, has barely budged, with the front-month contract 0.03% higher at $97.50 per barrel.
  • Elsewhere, gold futures have added 0.1% ahead of the bell, with gold for February delivery last seen trading at $1,231.60 an ounce.
Currencies and commodities

Earnings and Economic Data

Economic reports slated for today include housing starts for September through November and weekly crude inventories. The FOMC announcement is due at 2 p.m. ET, followed by a 2:30 p.m. press conference at which Fed Chairman Ben Bernanke will speak. Stepping up to the earnings plate are FedEx (FDX), General Mills (GIS), Lennar (LEN), Oracle (ORCL), and Paychex (PAYX).

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