Mubarak Out, Market Up 02-11-2011

Cusick's Corner
Mubarak out, market up. The reality is that this market is in an overall bull trend and it does not look to be forming a top. This means that we are going to experience corrections, but the market could be forming a consolidation with a decent range until we break after 3-6 months of waffling around. Now, this does not seem like much insight but it does offer some sort of potential roadmap for the next 12-18 months. No topping seems to be in play at this stage. I wanted to apologize for the Wednesday Xpounds not going out, we had e-mail issues. In the future if you do not get the newsletter via e-mail, go to the blog at www.xpoundblog.com.
See you After Hours.

Stock market averages are clinging to modest gains on news reports Egyptian President Hosni Mubarak finally resigned. The stage was set for cautious trading early Friday after Mubarak said late Thursday that he would remain in power until September elections. The defiance raised some concern about escalating violence and unrest in Egypt, as well as other parts of the Arab world. Yet, anxiety levels seemed to ease somewhat on news the Egyptian President has now agreed to relinquish power. Meanwhile, the domestic news is light. On the economic front, a report released early showed the nation's Trade Balance at -$40.6 billion in December, which was in-line with expectations. Separate data released later showed the University of Michigan Consumer Sentiment Index up to 75.1 in February; which was better than the 74.2 in late January, but below economist estimates of 75.5. The Dow Jones Industrial Average showed little reaction to the data, but did see a morning lift on the Mubarak news. Through midday, the Dow Jones Industrial Average has added 13 points. The tech-heavy NASDAQ added 9.2. The CBOE Volatility Index (.VIX) is off .23 to 15.86. Options volume is respectable, with about 5.7 million calls and 4.2 million puts traded through 12:15pm ET.

Bullish
Genworth (GNW) is rallying along with other names in the sector after the Obama Administration outlined a proposal that would limit the government's role in the housing loan market. MGIC (MTG) and Radian (RDN) are seeing strong gains on the news. GNW has added 59 cents to $13.62 and options volume through midday includes 24,000 calls and 1,560 puts. March 14 calls are the most actives, with 6,540 traded. February 14 and 15 calls, which expire at the end of next week, are seeing action as well.

India's Tata Motors (TTM) shares are rallying after the company reported a better-than-expected $550 million profit for the third quarter. TTM is up $2.34 to $26.56 and options volume is running 3X the average daily, with 9,420 calls and 2,410 puts trade in the name so far. March 28 calls, which are $1.44 out-of-the-money with five weeks of life remaining, are the most actives. 2,600 traded. Another 1,030 Feb 27 calls have changed hands.

Bearish
Corning (GLW) sees a substantial put spread Friday. Shares are flat at $22.16 and in morning trading, one investor bought a block of 28,000 August 22 puts at $1.83 and sold a block of 28,000 August 18 puts at 56 cents. This August 22 – 18 put spread for a $1.27 net debit and will create two of the largest blocks of open interest in the specialty glass maker. It's a bearish play, because the spread makes its best profits if shares fall to $18 or less through the August expiration. A shareholder looking to hedge stock might have initiated the position.

Nokia (NOK) shares are trading down and options volume is up after the company announced a partnership with Microsoft (MSFT). Some investors might have been looking for the company to provide more convincing information about its future plans, including updating financial guidance, because shares are not reacting positively to the news. Instead, NOK is reeling for a 13.9 percent loss, to $9.37, and early options trades include a seller of 11,000 June 11 calls at 29 cents. The call sale might be a liquidating trade following the news and sharp sell-off in Nokia shares today.

Unusual Volume Movers
Nokia (NOK) options volume is running 3X the usual, with 102,000 contracts traded and call volume accounting for 60 percent of the activity, according to data from website WhatsTrading.com.

Expedia (EXPE) options activity is running 10X the usual, with 88,000 contracts traded and put volume representing 53 percent of the volume.

Sandridge Energy (SD) options volume is 2.5X the typical levels, with 47,000 contracts traded and call volume accounting for 62 percent of the activity.

Increasing volume is also being seen in Wynn Resorts (WYNN), JDS Uniphase (JDSU), and the Bullish Dollar Fund (UUP).

Implied Volatility Movers
Garmin (GRMN) calls are active and implied volatility is moving higher Friday. Shares are trading up 57 cents to $33.15 and today's options volume includes 5,560 call options, which is 5X the normal for midday and compares to put volume of 1,730 contracts. February 33 and 34 calls are the most actives. Meanwhile, implied volatility is up 8 percent to 41.