Investors stage a resistant front to further “Sell in May” follow-through despite bearish Eurozone election results. As of 11:15 ET the SP-500 (SPY) is off narrowly by 0.10% on somewhat agitated but less-than-fearful testing of April’s key corrective lows.
Following a somewhat technically disruptive sell-off to close out the trading week, stateside bulls are showing a bit of defiant resistance to French and Greek elections. Populist ousters led by France’s socialist by political left winger Francois Hollande have raised fears regarding the Eurozone’s ability to fix its debt crisis as the region’s second largest economy looks to fracture its existing and unified front with conservative powerhouse Germany.
In Greece, the Left coalition has gained ground and could secure a second place finish in polls this week. Such an upheaval over the combined conservative New Democracy and Socialist PASOK could prove to be the death knell for EU and IMF bailout austerity measures and find the country breaking from the EU.
In those intertwined markets of influence, “flight-like” reactions outside of Athen’s near 7% pummeling or the Global X FTSE Greece 20 ETF (GREK) 7.80% have been limited. In fact, price action in France as represented by the iShares MSCI France Index (EWQ) is currently flashing gains of about 1.0% after holding above Friday’s pre-election lows.
The EUR/USD is tacking on 0.55%. The currency pair is still off from Friday’s close due to a stiff 0.76% decline in Sunday’s session, but has reclaimed the closely-watched 1.30 level after a slight breach of triple bottom price support dating back to mid-February.
Traditional stateside safe haven plays are also failing to find any real interest. The 20-Yr (TLT) is flat on the session, though positioned near breakout levels within a month-long lateral consolidation. The Greenback (UUP) is showing slightly more interest as it trades up 0.15% while it tests and rests on its 50SMA.
Black Gold (USO) is leading to the downside. A drop of 1.35% puts the oil proxy below 200SMA support and its four day decline at 8.50%. The technical drilling however continues to have additional bearish price drivers out of the Middle East and courtesy of OPEC and Iran acting as a drag on the commodity.
For its part, the VIX ($VIX) is barely bid by 0.50% after a near test of the 20% level. Intraday highs of 19.87% flashed a nearly panicked short-term differential of 13.7% relative to its 10SMA while remaining below April’s fearful 21.06% peak which coincided with the broader market’s corrective lows.
And then there’s the iShares Bull ETF (AAPL). Shares are on par with the broader market, but well-removed from its early green-delicious highs which sported gains of about 1.50%. Technically speaking, AAPL continues to test its pre-earnings bullish gap for support.
On the corporate confessional side, shares of India-based IT services and Naz’ 100 constituent Cognizant Technology (CTSH) are off 15.50% and atop the Percent Losers board following a bottom-line beat but one marred by below views sales guidance for Q2 and reduced FY12 revenue outlook.
In sympathy, fellow India IT outfit Infosys (INFY) is off a mild 1.50%. Shares of INFY were already technically well-prepared for today’s fallout following its own leading bearish earnings fallout back in mid-April.
Finally and in those sometimes accurate heat-seeking option markets, AIG (AIG) is under pressure by about 3.50% near 31.65 but holding above an announced US Treasury offering price of $30.50. The action has caught the eye of option traders this morning with more than 130,000 contracts changing hands and possibly one large bull rolling down a call position in January or perhaps initiating a vertical.
Intraday, two prints totaling 15,000 contracts in both the January 40 and 32 calls was put up for roughly $2.50. Large existing open interest in the out-of-the-money 40 and no open interest to speak of in the 32 call suggest a roll into the lower strike is possible. That type of adjustment could be a long call trader looking to increase their long delta exposure in AIG or possibly the likes of buy-writer rolling down their short call position.
Alternatively, with shares holding above today’s offering price and the well-out-of-the-money 40 call offering premium in excess of 35% for a buyer of the now at-the-money 32 call; a bull call spread is another likely option or umm, spread to consider as responsible for Monday’s most concentrated action.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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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.
