Stocks Battle Back 01-25-2011

Cusick's Corner
Global Growth, Inflation and the Confidence of the Consumer all came into play this afternoon, and in the end the market bounced back as it has all to often the last three months. This further highlights that 2011 is going to be a market timer type of market. If you are not a technical trader, adding some to the arsenal this year should be on the docket. Start by using some Simple Moving averages, 5 day, 35 day, 50 day and 200 day. The bigger you go the more long term you are looking. I would also look into adding some lower studies to measure strength of trend like an RSI, Relative Strength Index, to feel out the trend of a market or stock. In the end good fundamental and technical discipline will win out. Well off to prepare for ringing the bell on the NASDAQ open in New York, celebrating the 10 year Anniversary of optionsXpress. I want to personally Thank all of you for making this a great 10 Years and I look forward to many more. See you Midday.

Stocks battled back from morning weakness to finish mixed Tuesday. Investors digested a flood of earnings news early, including reports from five components of the Dow Jones Industrial Average. American Express (AXP) lost 2.2 percent and was the biggest loser in the Dow after the company late-Monday reported a 94-cent quarterly profit, which was 3 cents shy of expectations. 3M (MMM) was the second biggest loser, falling 2 percent, on earnings. However, Verizon (VZ), Traveler's (TRV) and DuPont (DD) saw post-earnings strength. Meanwhile, on the economic front, the Conference Board's Consumer Confidence Index surprised to the upside. It rose to 60.6 in January, from 53.3 in the final month of 2010 and much better than economist estimates of 53.5. Although investors seemed to shrug off the data and stocks were broadly lower at midday, buyers surfaced in the second half of trading. At the end of the session, the Dow Jones Industrial Average was down just 4 points and 78 points off session lows. The NASDAQ battled back from negative territory and finished with a 1.7 point gain.

Bullish Flow
Clean Energy (CLNE) shares gained 10 cents to $13.37 and bullish options activity picked up ahead of a CNBC interview with T. Boones Pickens scheduled for Wednesday. The activist investor owns 28 percent of CLNE and might have something to say about the company during the interview (unconfirmed). Today's options activity was focused on February and March calls. Only 265 puts traded on the Seal Beach, CA gas utility company. February 14s were the most actives and traded almost 2,000X. Another 1,053 March 15 calls changed hand. In addition, 64 percent of the day's total call volume traded at the asking price, according to data from options web information site WhatsTrading.com, which indicates that call buyers were dominating the trading activity and positioning for a higher share price for Clean Energy Tuesday.

Bullish trading was also seen in Murphy Oil (MUR), Juniper Networks (JNPR), and Star Scientific (CIGX).

Bearish Flow
Salient Pharmaceuticals (SLXP) saw an increase in options volume Tuesday. Most of the action was driven by one spread trader. In this play, the investor apparently bought 1,450 March 40 puts at $3.00 each and sold 1,450 March 35 puts at $1.45. With shares up 30 cents to $41.96, this Mar 40 – 35 put spread, for a net debit of $1.55, is possibly a short-term hedge ahead of March 7 FDA PDUFA review date for the company's Xifaxantreatment for irritable bowel syndrome. Earnings are expected around the same time.

Bearish flow also surfaced in Nordstrom (JWN), Aflac (AFL), and Bebe Stores (BEBE).

Index Trading
Mini-NASDAQ 100 Index (.MNX) hit a morning low of 222.80, but battled back to finish the day up .36 to 230.40. Options volume in the index rose to 5X the recent average daily. 12,000 puts and 1,700 calls traded on the day. The top trades were part of a spread, in which the investor apparently bought 3,000 March 225 puts at $4.30 and sold 3,000 March 205 puts at $1.09. The spread, for a net debit of $3.21, might be a straight bearish bet or perhaps to hedge a portfolio of NASDAQ stocks. MNX is a cash-settled index equal to 1/10th the value of the Nasdaq 100 Index (.NDX), which consists of the 100 largest non-financial names that trade on the NASDAQ Stock Market.

ETF Trading
iSharesMexico Fund (EWW) lost 42 cents to $61.85 and one strategist initiated a substantial straddle on the exchange-traded fund today. In this strategy, the investor sold 13,000 February 62 puts at $1.43 and sold 13,000 February 62 calls at $1.13. The straddle was apparently sold for a net credit of $2.56. 15,000 traded total and, since volume exceeds open interest in both contracts, this short straddle looks like a new position. It's not a bullish or bearish play, but a bet that shares will hold around $62 through the February expiration, which is in 24 days.There is considerable risk from this trade because neither side of the straddle (short puts and calls) is covered by another investment.