Stocks Struggle to Find Direction 02-14-2011

Cusick's Corner
Stocks struggled to find direction on this slow news day. Trading volumes on the NYSE were very low, plus there was little action in the option pits too. Retail Sales are due out pre-market tomorrow -- watch the Retailers, XRT, want to see if this weather is cooling down store activity. Don't forget that February options expire this week. To those traders who are glued to their trading screens – it is Valentine's Day – don't forget your sweetheart! See you Tuesday.

Stock market averages finished little changed on a slow day of trading. With no economic data or earnings of significance to guide the morning action, some of the early focus was on the Obama administration's $3.73 trillion budget overhaul, which includes a 5-year domestic spending freeze. The news didn't do much for trading on Wall Street, however, as the Dow opened a bit lower and traded in a narrow 40-point throughout the remainder of the trading session. Walmart (WMT) was the Dow's biggest loser after JP Morgan downgraded shares of the world's largest retailer. However, Exxon Mobile (XOM) gained 2.2 percent and was the big winner in the industrial average amid strength in the major oil names Monday. At the closing bell, the Dow Jones Industrial Average had lost just 5 points. The tech-heavy NASDAQ added 7.7.

Bullish
111,000 call options traded in Micron Technology (MU), as shares continued an impressive run higher Monday. Shares of the chipmaker are up in 25 of the past 32 trading sessions and have gained more than 50 percent in value since late-December. MU added 33 cents to $11.65 today and March 12 calls were the most actives. 16,340 changed hands. The contract is now 35 cents out-of-the-money and it looks like some investors were taking positions on hopes the rally will continue through the March expiration, which is now 32 days away. February 11 and April 12 calls saw brisk trading as well.

Bullish trading was also seen in AMD, Freeport McMoran (FCX), and Expedia (EXPE).

Bearish
While Micron Technology continues to see bullish flow, put activity picked up in another chipmaker today. National Semiconductor (NSM) added 6 cents to $15.48 and options volume rose to 6.5X the average daily after 9,350 puts and only 155 calls traded in the name. May 15 puts, which traded more than 4,000 contracts, were the most actives. May 16 and August 15 puts saw busy trading as well. In addition, of the day's total put volume, 78 percent traded at the asking price, according to data from web site WhatsTrading.com; which indicates that buyers were dominating the action in NSM puts today. The defensive trading might be in anticipation of earnings, due early-March.

Bearish flow also surfaced in Masco (MAS), PPL, and Repsol (REP).

Index Trading
Trading was quiet Monday, but volumes are likely to pick up later this week due to the options expiration. February options expire Saturday and the last day to trade is Friday. Some index products cease trading Thursday. Today, total volume in the S&P 500 Index (.SPX), CBOE Volatility Index (.VIX), and other cash indexes included 681,000 puts and 443,000 calls. SPX March 1300 puts were the most actives. 35,755 traded. SPX Feb 1,300, March 1,310, and March 1,200 saw some action as well. The S&P 500 added 3.17 to 1,332.32 and the increasing interest in short-term out-of-the-money puts is possibly a sign that some investors are bracing for a market pullback in the short-term. The index is up nearly 27 percent since August.

ETF Action
Put buyers surfaced in the iShares Taiwan Fund (EWT) today. Shares lost 12 cents to $14.85 and the biggest options trade of the day in the ETF was a block of 7,200 June 14 puts at 53 cents per contract on the International Securities Exchange, where sentiment data indicate that an investor bought-to-open a new position. At the end of the day, 8,000 contracts traded. Another 2,000 March 14 puts also changed hands. The put buying comes after a 5-day 7.5 percent losing streak in the Taiwan Fund and seems to reflect some concerns about additional losses in the months ahead.