As the Euro Goes -- So Goes... 06-16-2010

Cusick’s Corner
The market is again still above support and confirming the uptrend. With all the major indices breaking through the 200-Day Moving Average, additionally there’s leadership from multiple sectors, the market looks poised to challenge the upside. The Euro has also been able to mount a decent run, still above the $1.23 level and looking to challenge the $1.25 level. And yes -- at this stage, as the Euro goes so goes the market. We could see some late day challenges to the upside momentum if the Euro weakens, or the market may take a shot at some of the more over bought sectors. See you After Hours.

Stocks have battled back from early weakness and trading has turned mixed midday. The table was set for early losses on Wall Street following a day of lackluster trading in Europe and after the latest Housing Starts data disappointed. According to numbers released before the opening bell, builders broke ground at an annual rate of 593,000 homes in May and well below economist estimates of 655,000. Stock index futures faltered and the Dow Jones Industrial Average opened lower on the news. However, with help from better-than-expected Industrial Production numbers (1.2 percent in May vs. .8 percent consensus) and a rebound in crude oil (up 86 cents to $77.80), the tone of trading improved into midday. The Dow is now down 11 points, but the NASDAQ is up 3.5. The CBOE Volatility Index (.VIX) slipped .35 to 25.52. Options volume is picking up a bit, with about 3.75 million calls and 3.8 million puts traded at 12:30 ET.

Bullish
Halliburton (HAL) shares are up $1.11 to $26.57, as the oil drillers find strength from higher crude oil prices and news that BP has set aside $20 billion in escrow for Gulf spill claims. Options action in HAL is picking up as well, with 45,000 calls and 12,000 puts traded in Halliburton. Midday trades include an apparent buyer of 5,000 July 28 calls at 87 cents. June 26 and 27 calls are the most actives, with 11,400 and 6,090 contracts traded, respectively.

CBS shares are down 35 cents to $15.02 and more than 6,100 calls traded in the name so far. Most of the action is due to a spread trade, where an investor apparently sold 3,000 June 14 calls at $1.01 each to buy 3,000 July 16 calls at 35 cents each. The trade likely closes a position in June to open one in July, but at a higher strike price. June options expire at the end of this week and after today only two trading days remain before the contracts come off the board.

Bearish
Qualcomm (QCOM) shares lost 58 cents to $35 and are probably falling in sympathy with Nokia (NOK), which lowered its second quarter earnings guidance Wednesday morning. QCOM shares are down and some players have been expressing interest in October 33 puts, with 10,500 contracts traded and about 70 percent trading at the Asking price, which indicates that put buyers are initiating the trades.

Fannie Mae (FNM) puts are very active, as shares tumble on news shares will be de-listed from the NYSE. Freddie Mae (FRE) announced early Wednesday that it would de-list shares and begin trading in the OTC market. FNM followed suit a little later. Shares of both are reeling on the news. FNM is 35 cents to 57 cents. 150,000 put options have traded in the name, or about 200X the expected volume for midday action!

Unusual Volume Movers
Freddie Mac (FRE) options volume is running 8X the usual, with 43,000 contracts traded and put volume accounting for about 60 percent of the activity.

CNO Financial Group (CNO) options activity is running 9X the usual, with 21,000 contracts traded and call volume representing 91 percent of the volume.
Terex (TEX) options volume is running 6X the usual, with 14,000 traded and call volume representing 97 percent of the activity.

Unusual volume is also being seen in ITT Education Services (ESI), McMoran Exploration (MMR), and Pharmacyclics (PCYC)

Implied Volatility Movers
Fuqi International (FUQI), a Schenzen, China jewelry company, is rallying and implied volatility is easing Wednesday. There is no company specific news to explain the action, but shares are up 8 percent to $9.65 and options volume is running at 3X the average daily, with 4,060 calls and 260 puts traded. Meanwhile, implied volatility has dropped about 5.5 percent to 87.