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Wall Street's Monday Lunch Options

By Chris Tyler, Optionetics.com | Mon April 30, 2012 10:50AM PT

Questionable, disappointing economic data results in a bit of slightly easier to appreciate pre “Sell in May” profit-taking Monday. As of 11:30 ET, a less “Fed Up” bull (SPY) is off 0.50%, back below 1400 and confirming a lower high for bears gearing up for the start of less seasonally hospitable conditions known as the Worst Six.

On the heels of a four day, 2.5% rally largely due to Bullnanke’s translated “prepared to do more as needed” into “QE3, here we come!” bulls are having difficulty following through with that program despite further supportive i.e. weak economic reports.

After last week’s second half of “wink, wink” style disappointments on data ranging from a stiff drop in durable goods, jumping weekly claims and weak-in-the knees GDP, worse-than-forecast personal spending, regional manufacturing and an official “R” rating for Spain’s economy are failing to produce the same effect on investors maybe questioning too much of a good or umm, bad thing.

By the numbers and off the official docket Monday, personal spending for March rose by 0.3% while falling short of Street estimates of 0.5% and representing a steep drop from February’s 0.9% gain. At the same time, the failure to spend comes despite incomes rising by a stronger-than-expected 0.4% compared to views of 0.2% and a prior reading of 0.3%.

Intraday, Chicago PMI data for April showed a larger-than-prepped for dip to 56.2 from March’s 62.2 level and estimates of 60.0. And across-the-pond, Debt PIIGS constituent Spain has fallen into a recession for a second time since 2009.

The official declaration of recession follows last week’s less-than-jolly signal for the U.K. after a report confirmed Spain’s economy shrank in Q1 for a second consecutive quarter while matching the fourth quarter's contraction of 0.3%. The good news, depending on the analyst interrogated, is Monday’s data did come in slightly above some forecasts expecting a decline of 0.4%.

In those other intertwined markets of influence, Spain’s 10-Yr is actually modestly bid with yields remaining below the closely-watched 6.0% level; however the iShares MSCI Spain Index (EWP) is under relative technical duress of about 2.0%. Periphery news comes from the S&P after analysts reduced ratings on 16 of Spain’s banks.

The CBOE Volatility Index ($VIX) is showing a modicum of agitation. The sentiment gauge is up 6% and piercing its 50SMA, but following last week’s move to three week lows, prices are more or less in a neutral position below the closely-watched, mean-reverting 10SMA.

The Greenback (UUP) is flat after narrowly confirming a near-two month double bottom formed just below its 200SMA. In the commodity space, Black gold (USO) is off fractionally and continuing its technical mission of consolidating laterally just below key weekly resistance. COMEX Gold (GLD) is up by a similar amount and prone to flickering red while the more economic-sensitive silver (SLV) is off 0.80%.

And the iShares Bull ETF (AAPL) is off 2.70%. The action marks a third day of profit-taking following last week’s massive earnings-related price spike with nary a bearish story found on traders iPhone’s, iPads and Mac’s to account for shares non-gravity defying movement.

Finally and in those sometimes accurate heat-seeking option markets, intraday buyout rumors for Monster Beverage (MNST) from Dow constituent Coke (KO), the world’s largest purveyor of snack stuff, has seen implieds spike in the front couple months while shares trade aggressively higher by about 12% in ultra-volatile conditions.

Most active by a wide margin, the briefly in-the-money June 80 call has traded more than 4,400 contracts. Compared to non-existent open interest, there’s no question of Monday’s opening of positions. However, given a massive trading range of $0.20 to $8.00 and flood of prints; there’s also little question of fast money operators guzzling up profits or maybe regurgitating a less fresh call with a bit less intraday fizz at a current price of $2.80 per contract.    

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 


Recent articles by Chris Tyler, Optionetics.com

September 21, 2012  -  Wall Street's Friday Lunch Options
September 21, 2012  -  Hot Shots: All Aboard or Train Wreck?
September 20, 2012  -  Wall Street's Thursday Lunch Options
September 19, 2012  -  The Expected Move: Bed Bath & Beyond Earnings
September 19, 2012  -  Wall Street's Wednesday Lunch Options


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