Financials Take Lead 11-29-2010

Cusick's Corner
Finance took the lead into the After Hours and the market followed. With Finance showing leadership and the cold weather hitting, we saw the Energy sector, XLE get a boost at the end of the day -- it's another offensive sector that will need to continue its upswing if the bulls want continued momentum. The EU will be the focus overnight and if there are any data surprises, could put some early morning pressure on the US markets. See you Midday.

Major averages battled back from early losses to finish modestly lower Monday. With no economic data on the calendar, the focus early in the day was back on Europe where the euro fell to two-month lows and major stock market averages suffered steep losses on concerns about the unfolding European Debt Crisis. France's CAC 40 Index helped pace the decline with a loss of 2.4 percent. Then, stocks moved broadly lower in the US early, but the situation was steady by midday. Market turned mixed Monday afternoon and at the closing bell, the Dow Jones Industrial Average was down 40 points, but 122 points from session lows. American Express (AXP), BofA (BAC) and DuPont (DD) were the best percentage gainers in the Dow. The tech-heavy NASDAQ lost 9.3 points, but finished almost 30 points from its worse levels.

Bullish Flow
FedEx (FDX) helped lift the Dow Jones Transportation Average to higher ground. Although the Dow finished down 40 points, the transports settled the day up 17 points after FedEx shares were upgraded at Credit Suisse. The firm raised its rating to Outperform from Neutral. FDX surged $4.09 to $91.59 on the news and options volume jumped to 5X the average daily. 21,000 calls and 6,945 puts traded on the shipping company. December 90 calls were the most actives. 6,866 changed hands. Dec 95 and 100 calls saw brisk trading as well. Focus now shifts to FedEx earnings, due out December 16 and one day before the December expiration.

Bullish options action was also seen in Walgreens (WAG), Sprint Nextel (S), and FedEx (FDX).

Bearish Flow
Eagle Bulk Shipping (EGLE) finished flat at $5.01 and options volume was 2.5X the average daily Monday, with 3,400 puts and 580 call options traded on the dry bulk shipper. The action was concentrated in the December, January and March $5 puts. The December 5s were the most actives. 1,300 traded and, with 87 percent trading at the ask, it looks like put buyers were dominating the action. No news on the stock. Shares are down 12.2 percent since 11/15 and today's put buyers are possibly taking positions on concerns about additional losses in EGLE in the weeks ahead.

Bearish flow also picked up in Medco Health Solutions (MHS), Tyson (TSN), and Shuffle Master (SHFL).

Index Trading
Trading was slow in the index market despite increasing market volatility Monday. The Dow Jones Industrial Average fell more than 160 points early and the CBOE Volatility Index (.VIX) hit a one-month high of 23.84. However, things had settled down by midday and market action was mixed late in the day. A modest round of selling pressure surfaced in the final hour and the Dow closed down 40 points. Meanwhile, VIX gave back morning gains and finished the day down .69 to 21.53, near session lows. 364,000 calls and 475,000 puts traded across the S&P 500 Index (.SPX) and other cash indexes, which is only 75 percent the recent average daily index volume, according to Trade Alert data. The top trade of the day was a block of 19,400 VIX April 35 calls at $2.10, which appears to be an opening buyer taking a position in anticipation of increasing volatility.

ETF Trading
IShares MSCI Europe, Far East and Asia Fund (EFA) lost another 49 cents to $54.88 and is down 7.7 percent since 11/4 amid ongoing concerns about the European Debt Crisis and other problems currently plaguing global financial markets. Meanwhile, options volume in EFA hit more than 3X the normal levels, with 114,000 puts and 24,000 calls traded on the ETF. The top trade was a block of 45,800 March 45 puts at 96 cents per contract. The massive trade appears to be an opening premium buyer and if so, it's probably an institution looking to hedge the risk of increasing volatility across global financial markets from now through March.