Technical Indicators Signal Lack of Bullish Conviction 04-25-2011

Cusick's Corner
I'll make it short and simple. The movement today raised a red flag in that there hasn't been any real momentum to the downside. Whether you are looking at a MACD or RSI neither is signaling strong bullish conviction. Finance and Tech are also lagging and these sectors need to kick into offensive gear if we are going to see the bulls run the streets. See you Tuesday.

Stocks finished mixed in a day of low volume and slow trading Monday. Some investors are possibly in wait-and-see mode ahead of a busy week of earnings news. Ford Motor (F), Coca Cola (KO), and Exxon Mobile (XOM) are among the widely held names due to release results in the days ahead. Meanwhile, in stock news, Johnson Controls (JCI) and Kimberly Clark (KMB) slipped on profit results early Monday. The only economic stat of the day was a report on New Home Sales, which showed improvement to an annual rate of 300,000 in March, from 270,000 the month before and better than the 280,000 that economists had expected. Beyond that, there wasn't much new information to guide the market one way or the other. The Dow Jones Industrial Average traded in a narrow 60-point range and finished down 26 points. The tech-heavy NASDAQ added 5.

Bullish
Goodyear Tire (GT) call options were rolling Monday. Shares added 27 cents to $16.23 and notched new 52-week highs today. Options volume rose to 4.5X the 22-day average daily. 19,000 calls and 3,165 puts traded on the tire-maker today. May 17 calls, which are now 4.7 percent out-of-the-money and expire in 25 days, were the most actives. 14,895 contracts traded. May 18, June 18, and July 15 calls saw interest as well. The May 16 was the most active put option. 1,442 traded. Most of the action was on the call side of the options chain, however, and the bullish trading might be a play Goodyear's earnings, which are due Friday morning.

Bullish trading was also seen in Xerox (XRX), NetApp (NTAP), and SanDisk (SNDK).

Bearish
Put activity picked up in Pepsico (PEP). Shares of the beverage maker lost 38 cents to $67.03. Meanwhile, 12,000 puts and 2,260 calls traded in the name. The focus was on the July contracts. The July 60 puts, which are 10.5 percent out-of-the-money, were the most actives. 3,350 traded. July 55 and 57.5 puts saw interest as well. Some shareholders might be hedging their positions ahead of earnings. Or, it might be straight bearish trading in Pepsico ahead of the results, which are due out Thursday morning.

Bearish flow also surfaced in Waste Management (WM), Pilgrim's Pride (PPC), and Cadence Design Systems (CDNS).

Index Trading
There was very little volume in the index pits today. 209,000 calls and 181,000 puts traded across the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX) and other cash index products today, which is only about 36 percent the normal volume, according to Trade Alert data. Consequently, there isn't much to write about. VIX did see a bit of action, however. After suffering a three-day 13.4 percent loss Tuesday through Thursday, VIX added 1.08 points to 15.77. Still, options volume on the volatility index was very light. 96,000 calls and 25,000 puts traded in the VIX pit, or less than 40 percent the normal volume.

ETF Action
Today's options volume in the iShares Silver Fund (SLV) was very impressive. While gold notched new record highs, silver rallied 73 cents to $46.79 today. Prices have now risen 74.5 percent in just three months. The mind-boggling rally in the metal is catching the attention of options trades. SLV, which is the ETF that holds the metal stored in bank vaults, gained 29 cents to $45.83 and 1.43 million options traded on the fund today. 919,000 calls and 515,000 puts changed hands. Trading was brisk in May calls with strikes ranging from 40 to 60. May 50 calls and May 47 puts were the most actives.