Take the Market's Pulse Using the 200-Day

Cusick's Corner
Over the weekend take a look at the benchmarks and your individual holdings to establish a sense of support. For example, consider looking at the S&P 500 September Future to help understand the general pulse. The S&P is 5 points before getting to the 200-Day Moving Average (technical support for the long-term), challenging the bulls and this now shifts my analysis to other sectors and segments to see if they too are challenged. When I look at Tech, I see that AAPL, NKE, FDX, OIH, POT, and SPY are all at, or have just sliced the 200-Day. This is a flag that sentiment is potentially shifting in these names and must be monitored closely. This can be a good sentiment barometer, helping you strategically decipher, whether it's bullish or bearish, the underlying tone of that market or name. For anyone in New York -- we are hosting a workshop tomorrow and details are on the site. Register.

Stock market averages finished in the red on disappointing earnings news and worries about the European Debt Crisis Friday. Oracle (ORCL) finished with a 4.1 percent loss after the software maker late-Thursday lowered its fourth quarter sales outlook. Disappointing earnings news from Micron (MU) also weighed on the tech sector. Shares of the chipmaker tumbled 14.5 percent. Meanwhile, the euro lost .5 percent against the dollar after Moody's placed a number of Italian banks up for review for possible downgrade. Yet, the day's economic data was a bit better-than-expected, with durable-goods orders up by 1.9 percent in May and the Commerce Department revised up its estimate for first quarter economic growth to 1.9 percent. But the disappointing earnings and ongoing worries about the European debt crisis seemed to overshadow the day's economic news. The Dow Jones Industrial Average was lower at midday and extended the decline into the final hour. At the closing bell, the Dow was down 115 points and the tech-heavy NASDAQ lost 33.9.

Bullish
MGICInvestments (MTG) edged down a penny to $6.04 and September 7 call options on the Milwaukee, WI surety and title insurance company were busy today. 5,948 contracts traded, mostly in smaller sizes. The biggest trade was a lot of 652 contracts at 47 cents per contract on the ISE, which was an opening buyer, according to data from the exchange. Players were taking positions and are possibly looking for MTG to recapture some of its recent losses from now through September. The stock has been pummeled in recent months and is down nearly 50 percent from the highs seen in early January. So today's flow might reflect bottom-fishing in MTG.

Bullish trading was also seen in St. Jude Medical (STJ), Tellabs (TLAB), and Lubrizol (LZ).

Bearish
Delta Airlines (DAL) lost 51 cents to $9.53 after a downside revenue forecast from United Continental (UAL) sent many names in the sector lower today. The AMEX Airline Index (.XAL) gave up 2.1 percent. At the same time, trading was brisk in Delta Airlines options. 17,000 puts and 14,000 calls traded on the airliner. The most actives were August 9 puts. 5,340 contracts changed hands and, since 98 percent of the flow was at the offer, put buyers seemed to be driving the trade. Similar action was seen in the September 9 puts. Since the $9 put on Delta is 5.3 percent out-of-the-money, today's buying seems to reflect concerns that shares will continue to lose altitude in the weeks/months ahead.

Bearish flow also surfaced in Sandisk (SNDK), EMC and SuccessFactors (SFSF).

Index Trading
It was a very quiet day in the index options market today. 373,000 calls and 586,000 puts traded on the S&P 500 Index (.SPX), Russell 2000 Small Cap Index (.RUT) and other cash-settled indices today, which is only about 75 percent the recent average daily levels, according to Trade Alert data. Yet, while volume was light, implied volatility [IV] in the options of many of the stock indexes moved higher. CBOE Volatility Index (.VIX), which tracks the IV of S&P 500 Index options, finished the day up 1.82 to 21.11 and closed at its highest levels of the week. The volatility index has now rallied 36.6 percent in June amid worries about the economy, the European Debt Crisis, and corporate earnings.

ETFAction
Market Vectors Russia Fund (RSX) saw increasing volume today. Shares lost 26 cents to $36.88 and had a rough week. Not only is the European Debt Crisis weighing on global equity markets, but Russia's economy is also heavily dependent on oil. Crude oil fell from $93.40 to $91.17 per barrel this week and is now well below the levels seen less than two months ago, when prices ran above $115. RSX has been trading lower as well and has fallen 14.6 percent from the highs seen in early-April. Meanwhile, defensive trading was seen in the Russia ETF today. 9,700 puts and 600 calls changed hands, which is 3.5X the recent average daily. Downside August and January 35 puts were the most actives in RSX.