Short-Term Support in Greenback 11-08-2010

Cusick's Corner
The market got a well deserved weekend after last week's unbelievable amount of data. The market now is digesting some new concerns about potential sovereign debt issues arising again in the EU. Yes, this is a broken record but it has bolstered some short-term support in the Greenback, UUP. If this strength continues and concern with the EU heightens, watch the Euro currency (FXE), we could see some shake outs especially in the key offensive sectors like Industrials (XLI), Finance (XLF), Tech (XLK/QQQQ) and Consumer (XLY). The bid has supported these shakeouts in the past, but if three out of these four sectors start to take it on the chin, then the market could have further challenges ahead. See you After Hours.

Major averages opened lower and trading has been somewhat sluggish Monday, but with no real major news items to guide things one way or the other. The economic calendar is empty and there have been no earnings of significance. The dollar is getting some attention, as it staged a modest rebound to start the week. However, overall, not much volatility is being seen across global financial markets so far today. The Dow Jones Industrial Average is down 36 points, but the tech-heavy NASDAQ is up 1.5. The CBOE Volatility Index (.VIX) added .55 to 18.81. Trading in the options market remains very active, with about 4.3 million calls and 3.2 million puts traded through 12:15 ET.

Bullish
MGM is seeing a day of brisk trading. Shares have added 57 cents to $12.68 after Mad Money's Jim Cramer recommended shares, saying that “Las Vegas is Back.” The stock is higher and MGM options volume includes 82,000 calls and 20,000 puts through midday. December 14 calls are the most actives, as some players might be acting on Cramer's recommendation and buying calls as a way to “lock in” the right to buy the stock at $14 through the December expiration. November and December 13 calls are very busy as well.

Commscope (CTV) calls are seeing increasing action after the Wall Street Journal reported that TPG Partners might make an offer for the company that tops the current one being proposed by Carlyle Group. Shares have added 75 cents to $32.20 and options volume is double the recent average daily, with about 10,000 calls and 1,330 puts traded in the name. December 31 calls the most actives. 7,100 traded and the action included some “buy-writes” or covered calls, with some investors selling these calls against shares, according to a source on the exchange floor.

Bearish
US Natural Gas Fund (UNG) adds 18 cents to $5.84 and is in the midst of a 3-day 5.5 percent gain. Natural gas (December) is up 11 cents to $4.05 through midday. Meanwhile, an interesting spread surfaced in the exchange-traded fund Monday morning after one strategist apparently paid 37 cents for the December 6 – 5 put spread, 21,800X. That is, they bought 21,800 December 6 puts at 43 cents and sold 21,800 December 5 puts at 6 cents. This spread looks like a new position and a bearish one. It has a max pay-off if natural gas prices cool down and UNG falls to $5 or less by the December expiration.

Dow Jones Real Estate ETF (IYR) loses 25 cents to $57.33 through midday and today's options volume includes 34,000 puts and 4,070 calls. One player has been accumulating a position in the November 55 puts, according to a source on the exchange floor. More than 20,000 traded and this might be hedging activity. IYR is an exchange-traded fund that owns shares of Real Estate Investment Trusts [REITs] and real estate investment companies.

Unusual Volume Movers
Hecla Mining (HL) options volume is running 2X the usual, with 44,000 contracts traded and call volume accounting for 79 percent of the activity, according to data from website WhatsTrading.com.

Macy's (M) options activity is running 3.5X the usual, with 35,000 contracts traded and call volume representing 80 percent of the volume.

Priceline (PCLN) options volume is 2.5X the typical levels, with 27,000 contracts traded and call volume accounting for 62 percent of the activity.

Increasing volume is also being seen in JDS Uniphase (JDSU), Chubb (CB), and Alpha Resources (ANR)

Implied Volatility Movers
Human Genome Sciences (HGSI) implied volatility is elevated, as investors await an FDA decision for the biotech's Benlysta lupus drug. Regulators are expected to make a decision on December 9. Shares are off 70 cents to $24.61 and today's options volume includes 13,000 calls and 12,000 puts. Implied volatility is moving up 9 percent to 153, as the news is expected to have important implications for the company's future.