The Dow Jones Industrial Average (INDEXDJX:.DJI) is eyeing a fourth straight day of gains, as investors take a glass-half-full approach to this morning's congressional testimony from Federal Reserve Chairwoman Janet Yellen. The new head of the central bank's prepared remarks will be released ahead of the open, while she will take the podium for her formal statement at 10 a.m. ET. Wall Street will take a fine-toothed comb to Yellen's testimony, looking for any signs of an additional shift in the Fed's current tapering plan. The central bank has reduced its monthly asset-purchase program by $20 billion since December.
"The S&P 500 Index (SPX) peaked yesterday at 1,799.94 -- which is just below the key round-number 1,800 level that we've been watching for some time," noted Schaeffer's Senior Trading Analyst Bryan Sapp. "Coincidentally, the 20-day moving average is right there as well, so bulls will want to see this conquered significantly for the 'all clear' signal going forward. Meanwhile, 1,770 and 1,740 are the key support areas below."
Futures on the Dow Jones Industrial Average (INDEXDJX:.DJI) are more than 51 points above breakeven.
The Chicago Board Options Exchange (CBOE) saw 1,016,821 call contracts traded on Monday -- the fewest since Dec. 31 -- compared to 717,369 put contracts. The resultant single-session put/call ratio jumped to 0.71, while the 21-day moving average remained at 0.59.
From the Trading Floor
"Bullish sentiment deteriorated quickly during the recent correction," said Sapp. "The National Association of Active Investment Managers (NAAIM) poll from last week showed money manager exposure at the lowest level since September. Also, the American Association of Individual Investors (AAII) poll from last Thursday showed more bears than bulls for a second straight week. This massive shift in sentiment occurred on a market correction of only about 6%. To me, this seems like a knee-jerk reaction, and could be a sign that there's still more upside left in equities. One troubling sign, though, is how poorly small-cap stocks have performed during the bounce over the past four days. Going forward, bulls will want to see these more risky companies outperform lower-beta names, and signal that risk appetite has returned to the market."
Currencies and Commodities
Earnings and Economic Data
Coming out today is the National Federation of Independent Business (NFIB) small-business optimism index, as well as wholesale inventories data. Meanwhile, CVS Caremark (CVS), Dean Foods (DF), Fossil Group (FOSL), Mosaic (MOS), TripAdvisor (TRIP), and Western Union (WU) will announce earnings.
The Case for Big Moves in IWM and QQQ
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