Monday’s Options Alerts

• July 12, 2002
• TradingMarkets Editors

We had another rock & roll day
today as the Dow dropped over 167 points in the early morning as a downgrade of
Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) dropped the index lower. Then we saw consolidation for much
of the session before selling off again during the final hour. The Nasdaq
outperformed the Dow or S&P, thanks in part to Dell
(
DELL |
Quote |
Chart |
News |
PowerRating) raising
second quarter guidance. However, wasn’t it last week that Dell executives came
out and told investors that they don’t see the environment getting any
better?

On the economic front, we got some conflicting data today. First,
the University of Michigan’s consumer sentiment index plunged to 86.5 from 92.4
last month. This was the lowest reading since last November. Retail sales jumped
1.1% in June, much higher than the 0.6% gain economists were expecting.
However, excluding auto sales, retail sales increased 0.4% or slightly below the
0.5% gain expected. Sectorwise, we saw lots of green in tech areas such as
biotechs
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) up 2.53%, telecoms
(
$XTC.X |
Quote |
Chart |
News |
PowerRating) up 2.18%, networking
(
$GIP.X |
Quote |
Chart |
News |
PowerRating) up 2.03%. Worst performers today were utilities
(
$UTY.X |
Quote |
Chart |
News |
PowerRating)
down 3.88% and retail [ $RLX.X|$RLX.X]. For more information on today’s action, please refer to
the market
recap.

The VIX
(
$VIX.X |
Quote |
Chart |
News |
PowerRating) gapped
slightly higher at the open, then later reversed to close near the
lows of the day. This shift
in intraday sentiment again shows a decrease in fear. No more CVR signals
were triggered today. The VXN
(
$VXN.X |
Quote |
Chart |
News |
PowerRating) opened lower thanks to Dell and closed near
the lower third of its range. This shift in intraday sentiment
also shows a decrease in fear. The VXN triggered a CVR 2 buy signal
today. Despite the plethora of CVR buys yesterday, we still didn’t get a
bounce. Despite the oversold conditions and the extremes in investors fear,
buyers are reluctant to step up to the plate.

Points of Significance:

Investors Financial Services
(
IFIN |
Quote |
Chart |
News |
PowerRating)
gained over 8% on
more than triple its average volume.
The shares staged a sharp countertrend rally today but was repelled by
resistance at its .618 retracement and its 200-day moving average. Volatility is
high, so avoid buying an outright option.

Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) dropped more than
7% on more than four time its average volume. Home Depot continued its descent
today as Merrill Lynch downgraded the stock on concerns of weak sales. Shares
of the home improvement giant have sliced through its September lows — its next
stop could be the 1.27 retracement level at 23.85.

Volatility Index	Close	Net Change	Signals/Direction	% Above/Below 10 Day Moving Average	Significance
VIX	38.33	DOWN 0.31	NONE	13.30% Above	At Extreme
VXN	66	DOWN 2.99	CVR 2 BUY	13.10 % Above	At Extreme

Abnormal Options Volume With Price Movement
—
Abnormal options volume (calls and puts) with stock price movement

Name	Symbol	Net % Change	Volume	Avg. Volume
Veeco Instruments	VECO	– 19.74	1981	322
Duke Energy	DUK	– 11.44	17452	3033
Investor Financial Services	IFIN	+ 8.26	559	179
Home Depot	HD	– 7.35	32559	4762
Advent Software	ADVS	– 4.50	1694	213
Lockheed Martin	LMT	– 5.77	8425	1892

Stocks With Biggest Spikes in Implied
Volatility — Stocks with biggest increases or decreases in implied
volatility compared to previous day

Spike Up

Spike Down

 

Name	Symbol	IV	Previous IV	High IV	Low IV
General Electric	GE	45.9	53.9	43.9	28.7
Maverick Tube	BVK	62.3	72.7	61.6	41.7
Dell Computer	DELL	55.6	63.8	54.7	38.3
Comcast	CMCSK	58	66	84.4	28.9
Moody’s	MCO	30.1	33.8	34.4	22.4
Healthcare	HCA	35.5	39.7	33.1	21

Please use stops on every trade!