Following Monday’s modest profit-taking against technically limited upside and sterilized historical tendencies, bulls opt to stand tall on 9/11 despite potential economic hazards. As of 12:05 ET the SP-500 (SPY) is up 0.44% and trying to defy gravity with influential help from non-organic food for bulls.
Meetings between the Troika and Greece regarding its progress, a high court ruling on the constitutionality of the ESM by German lawmakers set for Wednesday and Thursday’s FOMC rate decision are being greeted with a bit more optimism Tuesday.
Tuesday’s about-face appears all the more impressive given Monday’s overbought market conditions and despite Moody’s warning of a one notch downgrade to the US’ credit rating if congressional meetings fail to “lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term.”
In those intertwined markets of influence, the iShares Bull ETF (AAPL) is 0.60%. On the heels of Monday’s after Monday’s bearish sinking of 2.6% after narrowly striking fresh all-time-highs out-the-gate, bulls are enjoying something sweeter than organic foodstuff to keep September tendencies at bay.
The EUR/USD is bid by 0.65% and displaying surprising bullish resolve. The move comes in the face of German Finance Minister Schaeuble stating the country is against the debt union and shared liability for a “printing press” won’t resolve the EU’s credit crisis.
Technically, Tuesday’s rally in the EUR/USD has the currency pair overcoming key resistance of its 200SMA and intersecting daily up-channel and longer-term weekly downtrend line from May 2011. Separately but co-joined at the hip, Eurozone ETFs (EWP, EWI and EWG) are up about 2.25% to 3.5% led by the Global X FTSE Greece 20 ETF (GREK) and extending their runs to fresh intermediate highs.
Both the US Oil Fund (USO) and Dow Jones Transports (IYT) are supporting the broader market with similar relative strength gains of about 0.65%. Technically, the daily charts of each remain laggards and bearishly positioned within consolidation patterns. For its part, the IYT is has broken slightly above longer-term 200SMA resistance within a symmetrical triangle.
And the VIX ($VIX) is off 1.0% near 16.15% after challenging its 50SMA in Monday’s impressive-sounding 13.6% spike higher. More importantly and failing to make the day’s headlines, session lows of sub 14% are nominally cheap historically, came within a point of the Fear Gauge’s August and five-year lows and flashed an overly-confident 10SMA differential of 15.5% worthy of causing a shift in how fear is perceived by bulls.
Finally and in those sometimes accurate heat-seeking option markets, indentured government servant AIG (AIG) is seeing an eight-fold jump in its option activity today on overall volume of 225,000 contracts. Shares are off about 0.85% but rebounding from a test of its 50SMA after establishing four days of lower lows.
AIG announced this morning Treasury pricing of roughly 554 million shares of common stock at a price of $32.50 as Uncle Sam looks to reduce some of its approximate 53% stake down to about 21.5%. Incidentally, today’s technical test of 50SMA lines up quite smartly with the IPO as shares of AIG held that price with a low of 32.56.
Most active, the Weeklys September 32.5 call is seeing a good deal of positional opening today on 25,000 contracts compared to residing open interest of less than 400. The 70 plus delta call trades for about $0.85 and $0.20 over parity with three days until expiration, at which time a double in value would require a move higher of about 3.0%.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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