Be On The Lookout With Your Wish List

The market is blowing through key support levels on all major indexes; I watched the most recent level 787 get cut on the S&P 500 (^GSPC) into the close. With the Stimulus plan now signed and the continued global economies souring, Gold does not look so bad. I could talk about the latest earnings, Wal-Mart (WMT) better than expected, but at this time people really do not care. This leads me to my final point ( I know most of you are saying “he has a point”), when the general market is so depressing and this news carries no more public interest, that is when I start looking. This happened after 1974, a very similar market cycle, I think this is how we will see this market make some interesting turns, when you hear nothing but a whimper at the darkest hour, that is when you grab your wish list and with disciplined plan, methodically and prudently execute that plan. I do not see this happening in the near future but I am on the lookout. See you Midday.

After Hours

Stocks were knocked down early in the trading session and could never get up off the mat Tuesday. Problems started overseas when the US markets were closed for President’s Day Monday. Japan’s Nikkei led shares lower across Asia after economic data showed the Japanese economy shrinking faster than economists had predicted during the fourth quarter. Tuesday, banks led European shares lower after Moody’s warned that Eastern European banks are facing increasing stress. Consequently, stock index futures were in the red before the start of trading in New York and the decline was extended shortly before the opening bell on Wall Street after the latest NY Empire State Index, a gauge of regional manufacturing activity, fell from -22.2 to -34.5 in February. Economists had predicted a more modest decline, to -23.5. At the end of the day, the news items were mostly negative and the Dow Jones Industrial Average (^DJI) was down nearly 300 points on the day. The CBOE Volatility Index (^VIX) gained 5.54 to 48.47. Trading volume picked up heading into this week’s expiration. Approximately 7.2 million calls and 6.9 million puts traded across the exchanges.

Bullish

Potash (POT) shares plunged $7.94 to $78.12 and options volume jumped, with 35,000 calls and 30,000 puts traded on the session. While February puts at the 70 and 80 strikes were active as the stock suffered big losses, the February 80 and 85 calls were the day’s most actives. About 18,000 contracts traded and about 60 percent of that volume traded ask-side of the bid-ask spread. It looked like some investors were using the weakness to buy short-term call options ahead of a presentation tomorrow at the Morgan Stanley Basic Materials conference. Similar activity surfaced in Mosaic (MOS). Bullish trading was also seen in Genentech (DNA), Viacom (VIA), and Unum (UNM).

Bearish

Dryships (DRYS) puts saw active trading ahead of an earnings report due out February 19 (after market). Shares of the drybulk shipper fell 74 cents to $4.02 and volume swelled in the February 2.5 put options. More than 13,000 traded on the day. Another 7,300 June 2.5 puts traded. Premium buying was seen, as some investors looked to out-of-the-money puts–possibly on concerns about what else Dryships might say when it releases earnings results Thursday afternoon. Bearish trading was also seen in Excel Maritime (EXM), Amdocs (DOX), and Agilent (A).

Index Trading

Volume is picking up in the index market ahead of this week’s options expiration. 680,000 index puts and 563,000 index calls traded in all. The CBOE Volatility Index, the S&P 500, and the Russell 2000 Small Cap Index (^RUT).has among the most actively traded contracts. Some players bought puts on the PHLX Japanese Yen Spot Price Index (XDN-X.A). The index fell .43 to 108.30 after the dollar made up some lost ground against the yen. In the options market, volume rose to 7 times the typical levels, with most of the activity concentrated in the March puts at the 105 line.

ETF Trading

The iShares Silver Trust (SLV) rose 45 cents to $13.99 and total options volume increased two times the average daily Tuesday. Investors showed interest in February 14, March 17, and January 2010 calls after silver rallied 39.5 cents to $14.02. Gold gained $26.30 to $968.50. Outside of that, trading in the ETF market picked up from Friday’s slow pace. 2.4 million puts and 2.2 million calls traded across all exchange-traded funds. The SPDR Trust (SPY), the Select Sector Financials (XLF), and the Powershares QQQ (QQQQ) were the day’s most actives.

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