Focus is on Dollar & Greece 05-13-2011

Cusick's Corner
Stocks are in the red this Midday after some decent GDP numbers in the EU. But the focus is on the Dollar and the potential implications of a worsening situation in Greece. I know that I have been talking about this all week, but at this stage in the game this is really the focal point for the market. We saw this situation arise a few months back and the market responded to the upside. As the dust settles and as the banks, financials are getting to their lows, figure out their exposure to Greece. The domestic equity markets are the place of strength and I see no reason why taking a tempered approach while keeping the macro economic issues of the day in our decision making process. As a side note, we will presenting a full day workshop in Charlotte NC this Saturday, and as a special bonus we will be simulcasting the event live online, use this link below to sign up so that you too can participate from the comfort of your own home: http://www.xpressevents.com/EventScheduleList.aspx?EventId=264 See you After Hours.

Stocks are under pressure and market averages are near session lows at midday. Yahoo (YHOO) weighed on the tech-heavy NASDAQ in morning trading after shares of the Internet search giant fell on worries about the company's investment in China's Alibaba group. Late yesterday, Yahoo said it was not informed of Alibaba's transfer of control of an online payment unit. YHOO is down 7 percent on the news. NVidia (NVDA) is also weighing on the tech sector, down 9.7 percent, after the company reported better-than-expected earnings, but some analysts expressed concerns about the slowdown in the company's core graphics business unit. A slide in the euro seems to be a factor through midday. The European currency is down another 1 percent against the dollar, which is also helping send crude and gold lower. Crude oil was down $1.28 to $97.69 and gold gave up $12.80 to $1,494. The day's economic news included the Consumer Price Index for April, which increased by .4 percent and in-line with expectations. A bright spot was the University of Michigan Consumer Sentiment Index. It increased to 72.4 in mid-May, from 69.8 last month and ahead of expectations (of 69.5). The market showed little reaction to the numbers and stocks are broadly lower at midday. JP Morgan (JPM), which is down 2.2 percent, is the biggest loser in the Dow Jones Industrial Average today. However, all thirty Dow stocks are under water and the industrial average is off 133 points. The NASDAQ lost 33. The CBOE Volatility Index (.VIX) jumped 1.40 to 17.43. Trading in the options market is active, with 4.2 million calls and 4.1 million puts traded through 12:20pm ET.

Bullish Flow
Whirlpool (WHR) shares are up and options are actively traded after Bloomberg reported that a US Panel has determined that the company has been hurt by low-cost refrigerators from South Korea and Mexico. Tariffs on these imports will probably be imposed. WHR shares are up $1.36 to $86.75 on the news. Options volume in the appliance maker includes 7,765 calls and 1,125 puts. May 90 puts, which are 3.7 percent out-of-the-money and expire on one week, are the most actives. 2,600 contracts have changed hands. May 92.5 and June 95 calls are the next most actives.

Select Sector Energy Fund (XLE), which is an ETF that holds all of the energy-related names from the S&P 500, is down 37 cents to $73.78 after crude slipped $1.28 to $97.69. A noteworthy spread trade surfaced in the XLE this morning when an investor bought 54,000 September 79 calls on the fund at $2.23 and sold 54,000 September 90 calls at 28 cents. They paid a net debit of $1.95 for the spread and apparently looking for a rebound in shares through the September expiration. The position offers a potential $9.05 pay-off (excluding commissions), if shares rally to $90 or beyond during that time.

Bearish Flow
NVidia (NVDA) is under pressure and options are seeing heavy trading today after the graphics chips maker reported earnings. Although results topped Street estimates and the company offered upside guidance for the current quarter, some analysts seemed concerned about the pace of growth in the company's core graphics business. Shares are down $1.79 to $18.71. Options volume is 2X the average daily. 37,000 calls and 63,000 puts traded in the name so far. The expiring Weekly 19 puts are the most actives. 16,520 traded. May 17 and 19 put options are seeing heavy trading as well.

Rambus (RMBS) is reeling. Shares saw a spike to $21.69 in mid-morning action, but are now off $2.75 to $16.52. The stock is falling to new 52-week lows after an Appeals Court ruled against the chipmaker in a patent case. Trading in the options market is brisk, with 33,000 calls and 30,000 puts having changed hands so far. May 17 puts, which are now 48 cents or 2.8 percent in-the-money, are the most actives. 9,100 traded. May 16 puts are seeing the second most volume. May 19 and 25 calls are seeing brisk trading as well.

Unusual Volume
Nvidia (NVDA) options volume is running 2X the (22-day) average, with 100,000 contracts traded and put volume accounting for about 63 percent of trades.

SINA options volume is 2X the average daily, with 65,000 contracts traded and put volume representing for 55 percent of the activity.

Eastman Kodak (EK) options volume is running 3X the average daily, with 45,000 contracts traded and put volume accounting for 66 percent of the activity.

Increasing options activity is also being seen in Kinross Gold (KGC), Lowe's (LOW), and Consol Energy (CNX).

Implied Volatility Mover
CBOE Volatility Index (.VIX), which tracks the expected volatility priced into S&P 500 Index (.SPX) options, is up 1.31 to 17.34 after the S&P 500 lost 11.54 points to 1,337.11. Options volume in the VIX pits includes 180,000 calls and 27,000 puts. The top trade is a spread in the July calls, in which the investor bought a 25,000-contract block of July 25 calls at $1.63 and sold 25,000 July 32.5 calls at 83 cents. The spread, for a net debit of 80 cents, looks like a bullish play in anticipation of another spike in VIX between now and July.