Watching SPX's 50-Day SMA 05-13-2010

Cusick's Corner
The latest weekly jobless claims were 444,000 while analysts were expecting 440,000 which was somewhat in-line with estimates. The market initially had a tepid response to the jobless news, traded relatively flat, but now drifting lower. I am keeping an eye on the SPX's 50-Day Simple Moving Average [SMA]; it needs to break 1173 to become potential support. After yesterday's upward convergence, Gold and equities are both down today, not seeing the flight to quality and safety in those products that we had seen in the last 24 hours. The greenback is up and the Dollar Index (DXY), which measures the US Dollar against 6 other major currencies, is at its highest in more than a year. The Euro is down, investors are nervous about the lack of details from the European Central Bank concerning the trillion-dollar bailout. See you After Hours.

The major averages are lower on disappointing jobless claims data and post-earnings weakness in tech bellwether Cisco Systems (CSCO). Data released before the opening bell showed weekly jobless claims falling by 4,000 to 444,000 in the week ended May 8. Economists were looking for a decline to 440,000. Meanwhile, shares of Cisco Systems are down 4.5 percent after the networking giant reported first quarter profits that beat Street estimates, but then issued downside revenue guidance for the second quarter. CSCO is weighing on both the Dow Jones Industrial Average and the NASDAQ in midday trading. The Dow is down 20 points and the NASDAQ lost 11.5. The CBOE Volatility Index (.VIX) slipped .35 to 25.17, as market action has been quiet so far Thursday. Trading in the options market is a bit slower as well, with about 4.3 million calls and 3.6 million puts traded at 12:30 ET.

Bullish
Alcoa (AA) is up 4.4 percent to $13.01 and easily the best gainer in the Dow Jones Industrial Average. The reason for the strength is unclear, as there is no company-specific news on the aluminum maker. Yet, options activity is picking up as well. About 136,000 calls and 11,000 puts have traded so far. June 14 calls have traded more than 56,000X and the activity includes a buyer of 20,000 contracts at 38 cents each in morning action Thursday.

Equinix (EQIX), a Foster City, CA communication services company, saw brisk trading early in today’s session. Shares hit a high $107.44 in very active trading, but then gave up most of the gains after Credit Suisse analysts said that recent chatter about a possible takeover of the company are unfounded. Shares are now up $2.58 to $101.83 and options volume is 5X the recent average daily. 16,000 calls and 1,600 puts traded so far. Buyers of May 105 and 110 calls surfaced early. Some of the action turned to selling, however, as shares reversed early gains and started moving lower.

Bearish
A big block of puts traded in Monsanto (MON) Thursday morning. Shares hit a new 52-week low and were recently down $1.46 to $55.37. In the options market, one player initiated a 1X3 put ratio spread, after selling about 7,300 October 60 puts and buying 22,000 January 45 puts. This spread appears to be a position adjustment, with the investor closing out a winning position in the October 60s and then opening a position (3X bigger) in the January 45 puts.

The top options trades so far today are in the Select Sector Financials (XLF). Shares of the fund, which hold all of the financial-related names from the S&P 500, are down 13 cents to $15.92. In the options market, one player was focused on the January 16 – 13 put spread, which traded at $1 even, 37,500X. It looks like a bearish spread where the investor paid $1.87 for the January 16s and collected 87 cents on the January 13s. If so, this spread is possibly a hedge and it makes its best profits if XLF falls to $13 or less by the January expiration.

Unusual Volume Movers
Baidu.com (BIDU) options volume is running 7X the usual, with 366,000 contracts traded and call activity representing about 62 percent of the activity.

Monsanto (MON) options activity is running 2X the usual, with 80,000 contracts traded and put volume representing about 64 percent of the volume.

Whole Foods (WFMI) options volume is running 3X the usual, with 28,000 traded and call volume representing 64 percent of the activity.

Leap Wireless (LEAP), Hess (HES), and Rio Tinto (RTP) also have unusual volume.

Implied Volatility Movers
Sybase (SY) implied volatility is crashing down on news SAP is buying the company for $5.8 billion or $65 per share. Shares are up 14.6 percent to $64.33 and options volume surged to 40X the recent average daily. 73,000 calls and 18,000 puts traded. Meanwhile, implied volatility has fallen about 75 percent to 18, as the options market seems to expect quiet trading in SY now that the deal has been announced.