Wednesday’s Options Alerts
AOL…..”You Got ‘N’ailed.” An unwelcome message from America Online coupled
with a report out of Merrill Lynch that said they were reducing their equity
allocation by 5% sent the ETFs reeling on the session. This was a continuation
of yesterday’s weak close, after the indices had gapped higher in the morning to
establish multiweek highs.
The news on the day was overall negative, and any
stories that didn’t fit the bill, like Texas Instruments’
(
TXN |
Quote |
Chart |
News |
PowerRating) positive
guidance, was somehow quickly discounted and routed by Wall Street’s bearish
sentiment. Amazing how quickly opinion and news can change overnight. The ever
incredible marketing machine of Wall Street. Madison Ave. has nothing on the
boys to the South of them, on the island they call Manhattan. People have been
saying there’s too much complacency, but I’ve got to say, if the past two days’
trading is any indication, they’re certainly quick to learn a new tune.
Technically speaking, the ETFs are just doing
what markets do in a trending market, and that is pulling back after
establishing fresh highs. You could also call it the “Fleecing of the
Retail,” a la
Don Miller, but we’ll stick to the nicer, kinder version of
events. The uptrends off of the October lows are still in place, and today’s
percentage loss in the ETFs was recorded on lighter volume. This comes after a
distribution day off of yesterday’s highs, but seriously, can you blame them? I
know I’ve said it once here before, but it BEARS repeating, “Bulls make
money, Bears make money, but Pigs get slaughtered”.
The
volatility indices
(
$VXN |
Quote |
Chart |
News |
PowerRating) and
(
$VIX |
Quote |
Chart |
News |
PowerRating) were up today. No
complacency there, as both of these gauges of investor sentiment showed that fear is still lurking close to the surface. The VXN has actually notched a fresh high in each of the last eight
trading sessions. This is interesting to note, because the Nasdaq was still
making fresh highs until yesterday morning. You could say that it was oversold
at those levels, but without splitting hairs, what it really says is that on
average, investors have been buying premium (protection), and haven’t been so
tickled by the current rally to get caught with their pants down, so to speak.
This action so far confirms the Bull case. As you know, if you’ve been reading,
I’ve got my horns on when its time to party with the Bulls, but I’m also quick
not to be caught in a stampede. As stated, technically the ETFs are still in
good shape. At this time they’re pulling back within uptrends that can be drawn
in the form of channel lines on the daily charts. With the VIX breaking through
a downtrend line and the VXN testing this same resistance pattern we’re keeping
a close eye on equity prices to hold bullish support levels to confirm that this
latest pullback is just that. So far, so good.
Points of Significance:
| Volatility Index |
Close | Net Change |
Signals/Direction | % Above/Below 10 Day Moving Average |
Significance |
| VIX | 31.76 | Up +1.71 |
No Signals |
8.14% Above |
Not at Extreme |
| VXN | 51.99 | Up +1.83 | No Signals |
9.30% Above | Not at 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 |
| Biovail | BVF |
+3% |
4074 | 640 |
| Concord EFS, INC. | CE |
+1% |
11667 | 2272 |
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 |
| America Online |
AOL |
58.4 | 50.6 | 93 |
43 |
| Lennar |
LEN | 54.7 | 48.8 | 65.1 | 37.7 |
| Manhattan Assoc. |
MANH |
76.2 | 69.1 | 114.7 | 67.9 |
Spike Down
| Name | Symbol | IV | Previous IV |
High IV |
Low IV |
| XL Capital |
XL |
29.4 | 33.6 | 67.6 |
25.6 |
| Exelon |
EXC |
34.5 | 38.4 | 46.1 | 25 |
Please use stops on every trade!