"Aera!" 06-21-2011

Cusick's Corner
All quiet on the western front and that is how the After Hours market finished up with market players waiting on the Greek vote and the FOMC statement tomorrow. The scope of this latest two-day run has been solid but the volume has been low and sentiment, which was previously very bearish with a Put/Call Ratio of 1.2, is now well below that level at .84. At this stage there are some battle lines being watched, 1260 & 1300s in the S&Ps, and once breached we may see the true character of this market. I want to thank all of you who participated in our market overview last night on the web, it was a great discussion and I look forward to doing it again Monday at 9pm ET. Keep an eye on the Crude Inventories number tomorrow, the black tea has been on the slide but there is a decent bid at these levels; let's see if it holds into the number. "Aera!" -- Greek battle cry. See you Midday.

Stock market averages finished with solid gains on diminishing concerns about the European Debt Crisis. A rally across the Eurozone helped set the stage for morning gains on Wall Street. France's CAC 40 gained 2 percent and helped pace the advance on hopes a default of Greek debt might be averted. The euro also strengthened and gained .7 percent against the dollar. Meanwhile, the domestic economic news included a report on Existing Homes Sales, which fell to an annual rate of 4.81 million in May. While that was down from 5 million the month before, it was better than the 4.75 million that economists had expected. Now, investors await word from the Federal Reserve. Officials started a two-day meeting on monetary policy today and will issue a post-meeting statement Wednesday afternoon. Action across the Atlantic seems to be the primary driver of short-term market moves, however, and the Dow Jones Industrial Average seized 110 points Tuesday. The tech-heavy NASDAQ gained 57.60.

Bullish
Tellabs (TLAB), a Naperville, IL communication equipment company saw increasing volume today. Shares added 26 cents to $4.31. Meanwhile, 16,000 calls and only 25 puts traded in TLAB today. August 4.5 calls, which are 4.4 percent out-of-the-money and expire in 59 days, were the most actives. 10,360 traded against 10 contracts of open interest. Some investors were apparently paying between 22 and 25 cents to open new positions in afternoon trading. July 4.5 and September 3.5 calls were actively traded as well. There was no obvious company news to explain the bullish action, but it appears to be speculative activity. Some investors might be bottom-fishing in the name. TLAB is down 36.4 percent year-to-date and touched a new 52-week low of $3.98 last week.

Bullish trading was also seen in Verisign (VRSN), GE and TIVO.

Bearish
Puts on Pain Therapeutics (PTIE) were busy for a second day. Option volume picked up yesterday after the FDA approved one of Pfizer's (PFE) tamper-resistant pain drugs. Now, some investors are awaiting a decision regarding Remoxy, which is a drug licensed by Pain Therapeutics and sublicensed to Pfizer. Shares gained 26 cents to $9.25 today and are up 7.1 percent this week ahead of the decision. Trading in PTIE options is decidedly more defensive, however. 1,620 puts and 350 calls traded in the name yesterday. 2,300 puts and 525 calls changed hands today. July 5.5 puts were the most actives. Some shareholders might be buying downside puts to hedge shares should the FDA rule against approval of Remoxy.

Bearish flow also surfaced in Exxon Mobile (XOM), Legg Mason (LM), and SAP.

Index Trading
576,000 calls and 627,000 puts traded on the S&P 500 Index (.SPX), the NASDAQ 100 (.NDX) and other cash indexes Monday. The volume represents about 88 percent the recent average daily volume, according to Trade Alert data. The S&P 500 gained 17.16 to 1,295.52 and SPX July and August 1250 puts were the day's most actives. SPX July 1,250 puts, which are now 3.5 percent OTM, saw the most volume. 70,970 traded. The action probably included some closing trades, as anxiety levels eased and stocks rallied today. The CBOE Volatility Index (.VIX), which tracks the expected volatility priced into SPX options, lost 1.13 to 18.86 and is now down 13.7 percent on the week. However, the market's so-called "fear gauge" is up 22.1 percent month-to-date and remains elevated ahead of an FOMC rate decision tomorrow.

ETF Action
SPDR 500 Trust (SPY) saw impressive volume today. Shares, which hold the same five hundred components of the S&P 500, gained $1.75 to $129.45. Meanwhile, 2.22 million puts and 1.06 million calls traded on the ETF. SPY July 125 puts, which are now 3.4 percent out-of-the-money, were the most actives. 187,000 contracts traded. July 117 and 129 puts both traded more than 100,000 contracts as well. The heavy volume in SPY July puts reflects the uncertainty investors now face. The S&P 500 dipped down to test its 200-day exponential moving average yesterday. It bounced off those levels and now investors are probably wondering if the recent decline was the beginnings of a major market move or just a correction in a longer-term bull market.