Friday’s Options Alerts
The ducks were quacking
today as the markets charged higher on strong volume. An Initial
Claims Report, reassuring words from Hewlett Packard, reallocation of funds from
the big boys upstairs, and a case of “sell the rumor, buy the news”
with General Electric, were all used as fuel for the fire. Actually, with the GE
“slam,” I don’t know if there was a rumor ahead of the lower guidance,
but the way it’s been trading lately, one has to wonder. And, by the way
they did increase the dividend, so I know Vida Nelson from the DRIPS commercial
will be excited.
Personally, I can think of other reasons for
today’s rally, but its probably not nearly as patriotic as news from America’s
titans of business. Can you say technical-based rally?? Well, certain folks on Wall Street definitely can, and today’s trade had all the earmarks
of traders and investors afraid of missing out. What was I saying just yesterday
about the cycle of greed and fear? Today’s action looks like a good example of
fear. The fear of being on the dock as the boat sails away. But guess what, they
may be right. I’ve been talking about this during the past few nightly reports,
and today’s gains underscore that the bulls just might be back in the bullpen,
so to speak. I’m sure the competition was fierce today as everyone was trying to
get through the same door all at the same time; the shorts covering, momentum
investors, hedge funds, fund managers…I just hope they’re all comfortable in
there, and don’t all try to back out at the same time too.
As mentioned, a healthy gain for all of the ETFs today,
with the Nasdaq 100
(
QQQ |
Quote |
Chart |
News |
PowerRating) and the semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) leading the charge.
The tech-heavy QQQ led the procession, and is now clear of all resistance. That
was a bit of a joke. Look at the weekly chart if you don’t get it. Seriously,
the Q’s have cleared initial resistance levels such as the August high and has
now established the beginnings of an uptrend. The clearance of those prior highs
is the first real indication that a new trend is in place. This is good, and
hopefully this will be a harbinger for the DIAs and SPYs as well. These two
ETFs have to still play catch-up in this department, but their action too,
looks very constructive.
As instructed previously, should you accept this
mission of jumping in the market, do so through the use of options. In the $$$
and Slightly in the $$$ are very attractive if you find something technically
appealing. I don’t call tops or bottoms, I try to anticipate by listening to the
market, and then I look for the best risk to reward strategy that the market
offers. Sometimes there is nothing that’s being offered that makes much sense to
me, and I stand aside. Other times, such as now, options are the way to go. It’s
up to you and your own strategy to take advantage of this situation.
The VIX
(
$VIX |
Quote |
Chart |
News |
PowerRating) and the VXN
(
$VXN |
Quote |
Chart |
News |
PowerRating)
both pulled back further, which one would expect with today’s upward
momentum in equities. However, its interesting to note that the VXN was
essentially flat in its reading. Hmmm?? The CVR signals have been flashing for
awhile now, and personally I haven’t been writing about investor complacency or
overbought conditions in this column , but I have to say, now things are
starting to get interesting. Price and volume are still my first consideration,
so that being said, “All Aboard”…just know where your stop is
before deciding to get off.
Points of Significance:
| Volatility Index |
Close | Net Change |
Signals/Direction | % Above/Below 10 Day Moving Average |
Significance |
| VIX | 27.37 | Down -1.29 |
CVR 3,6 Sell |
18% Below |
At An Extreme |
| VXN | 44.82 | DOWN -.70 | CVR1,3, 6 Sell |
12.4% Below | At An Extreme |
Abnormal Options Volume — This list
includes both percentage movers that are normally associated with an increase in
options activity, as well as stocks that have unusually high activity,
reflecting increased speculation of a potential price move.
| Name | Symbol | Net % Change |
Volume | Avg. Volume |
| PeopleSoft | PSFT |
+7% |
13579 | 2707 |
| Broadcom | BRCM |
+13% | 15877 | 5093 |
| FleetBoston Financial |
FBF |
+3% | 15587 | 1967 |
Stocks With Spikes in Implied
Volatility — Stocks with Increases and Decreases in implied
volatility compared to previous day. Candidates are then screened qualitatively.
These lists represent those issues that carry a blend of liquidity and/or
technical setups that might deserve further notice.
Spike Up
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
|
Universal Health Services |
UHS |
53.5 | 42.7 | 50 | 27.5 |
| Fresh Del Monte |
FDP |
56.5 | 45.7 | 52.7 | 32.8 |
Spike Down
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
|
AG Edwards
|
AGE |
30.8 | 35.3 | 48.5 | 26.4 |
| Neoware Systems |
NWRE |
80.7 | 91.7 | 108 | 78.8 |
Please use stops on every trade!