Overall Trend is Intact 05-16-2011

Cusick's Corner
The EU is still bogging down stocks and technically the challenge has been made to the Bulls. At this juncture this does not mean it's a trend change. The overall trend to the upside is intact unless there are some larger headlines (i.e. EU debt or Retail getting hit). The sentiment in the market, at least from a retail trader/customer perspective, is Neutral. I am watching the put activity going into this expiration week, keep in mind that there are many Retail Sector names announcing earnings this week (see XRT in Bearish Flow). See you After Hours.

Stocks are trading mixed Monday, as a weak reading on manufacturing offset a rebound in some of the commodity-related names. Data released before the opening bell showed the NY Empire State Index at 11.9 in May, which was down from 21.7 the month before. Economists were expecting the gauge of regional manufacturing activity to dip to 18. Meanwhile, the NAHB Homebuilder Sentiment Index remained unchanged at 16 this month, which was in-line with economist estimates. While the day's data wasn't inspiring, some of the metals names were seeing early strength after gold rallied on dollar weakness. However, the yellow metal has given up a good deal of the morning advance and is now up $4.30 to $1,497.70 an ounce. Crude oil is down $1.48 to $98.17. In stock news, Lowe's (LOW) is down 2.6 percent and JC Penney (JCP) off 3.3 percent on disappointing earnings results. NYSE shares tumbled 10.8 percent after NASDAQ OMX Group dropped its bid for the exchange. Meanwhile, American Express (AXP) and Intel (INTC) are leading the Dow Jones Industrial Average to a 14 point gain at midday. However, the tech-heavy NASDAQ lost 21.5. The CBOE Volatility Index (.VIX) edged up .02 to 17.09. Trading in the options market is light today, with 4.3 million calls and 3.7 million puts traded through 12:45pm ET.

Bullish Flow
Micron Technology (MU) call options are seeing very heavy trading today. Shares added 28 cents to $10.69. Meanwhile, 89,000 calls and 13,000 puts have traded on the chipmaker, which is more than double the average daily volume. 27 million Micron shares have also changed hands. May 11 calls, which are now 2.9 percent out-of-the-money heading into the expiration at the end of this week, are the most actives. 21,000 have traded. June 11 and 12 calls are seeing brisk trading as well. There's takeover talk in the name. It's unsubstantiated market chatter, but seems to be the catalyst for the relative strength in the stock and increased volume in MU today.

Morgan Stanley (MS) options are seeing increased volume Monday. Shares of the bank are flat at $24.13 and today's options volume of 17,000 calls and 15,000 puts is more than double the normal activity for MS. June 26 calls are 7.7 percent out-of-the-money and are the most actives in Morgan Stanley today. 6,375 have changed hands. Another 4,430 July 26 calls have also traded. It looks like some investors are buying to open new positions, perhaps looking for Morgan Stanley shares to rally beyond $26 in the weeks ahead. There's no news on the stock today. Some investors might be bracing for a rebound after the Morgan Stanley shares lost 22.2 percent from a 52-week high of $31.04 set in mid-February.

Bearish Flow
Dell Computer options are busy today. DELL lost 37 cents to $16 and trading is brisk, with 15.4 million shares traded through midday. Meanwhile, options volume is impressive. 112,000 puts and 42,000 calls traded in Dell so far. November 16 puts, which are now precisely at-the-money, are the most actives. 15,350 traded. November 15, November 17, August 15 and August 16 puts are seeing brisk trading as well. The increased put activity is probably related to its earnings report. The computer maker releases its results Tuesday afternoon.

Put volume is picking up in the SPDR Retail Trust (XRT). The exchange-traded fund is underperforming today, with notable post-earnings weakness being seen in JC Penney (JCP) and Lowe's (LOW). XRT is down 1.4 percent to $53.37 and a noteworthy morning trade was a block of 15,000 December 44 puts that traded at $1.27 per contract on the International Securities Exchange. It was an opening buyer, according to sentiment data from the exchange. Volume in the contract, which is 17.6 percent out-of-the-money, is now 15,500. A total of 30,000 puts and 2,120 calls have now traded in the retail fund.

Unusual Volume
Lowe's (LOW) options volume is running 3.5X the (22-day) average, with 47,000 contracts traded and call volume accounting for about 58 percent of trades.

Boston Scientific (BSX) options volume is 5X the average daily, with 46,000 contracts traded and put volume representing for 80 percent of the activity.

NYSE Euronext (NYX) options volume is running 4X the average daily, with 34,000 contracts traded and call volume accounting for 53 percent of the activity.

Increasing options activity is also being seen in Focus Media (FMCN), Expedia (EXPE), and Avon Products (AVP).

Implied Volatility Mover
NYSE Euronext (NYX) implied volatility is moving higher on news NASDAQ OMX Group and the Intercontinental Exchange (ICE) have pulled their joint bid for the exchange. NYX shares tumbled 10.8 percent to $36.50 on the news. 18,000 calls and 16,000 puts traded in the name. May 37 and December 34 puts are the most actives. Implied volatility in NYX options is moving up 18 percent to 16, compared to a 52-week high and low of 55 and 19.