Bigger Picture Remains Unchanged
Stocks closed mixed after trading in a narrow range on light volume, following several economic reports that were mostly in line with expectations. Even though the markets traded with a mostly upside bias this week, volume was too light for anyone to believe in future direction. The bigger picture remains unchanged, as the major indexes are all within a few points of their annual highs and the bears are unable claw their way into the market.
The Dow Jones Industrial Average ended up 14.00 points, or 0.12%, to close at 11,573. The S&P 500 fell 2.07 points, or 0.16%, to close at 1256, and the NASDAQ was down 2.21 points, or 0.08%, to finish at 2665.
CBOE Volatility IndexI:VIX directional bias was mixed, however individual strike option prices suggests movement. CBOE Volatility Index (VIX) closed up 6.6%, at $16.47. The elevated volatility suggests market makers are pricing in large price movement as VIX trades below its ten-day moving average of $16.98 and its 50-day average of $19.25.
SPDR S&P 500 ETF (SPY) - Get Report upward movement March volatility suggests more movement in 2011. SPDR S&P 500 ETF (SPY) closed down $0.18, at $125.60, on 879,000 puts contracts compared to 388,000 call contracts, with December (Q) 125 puts as the most active series on 116,500 contracts. January put option implied volatility is at 15, February at 17 and March at 19, below its 26-week average of 22, suggesting decreasing near-term price movement.
The PowerShares QQQ Trust (QQQQ) elongated option implied volatility suggest larger movement into spring. The Qs closed down $0.14, at $54.74, on overall put contract volume of 102,000 versus 73,000 call contracts, with December (Q) 54 puts as the most active series on 18,500 contracts. January put option implied volatility is at 17, February is at 19 and March is at 20, versus its six-month average of 22, indicating low near-term price movement compared to outer months.
The week of December 27 will be very quiet as there are no major corporate events on the calendar and very few economic ones. The following data are expected to be released on Monday: None; Tuesday: ICSC Goldman Sales due out at 7:45 a.m. EST, Redbook at 8:55 a.m. EST, S&P Case-Shiller HPI at 9:00 a.m. EST and Consumer Confidence and the State Street Investor Confidence index at 10:00 a.m. EST; Wednesday: MBA Purchase Applications due out at 7:00 a.m. EST and the EIA Petroleum Status at 10:30 a.m. EST; Thursday: Jobless Claims due out at 8:30 a.m. EST. Chicago PMI at 9:45 a.m. EST, Pending Home Sales at 10:00 a.m. EST and the EIA Natural Gas Report at 10:30 a.m. EST; Friday: None.
Activity will start to pick up again as we move into 2011. During the week of January 3, we get all the December ISMs, including China and the U.S., auto sales, same-store sales, and the December labor report. Fourth quarter earnings season will kick off during the week of January 10, with Alcoa (AA) - Get Report, Intel (INTC) - Get Report, and JPMorgan Chase (JPM) - Get Report reporting. The fourth quarter reporting season is usually more stretched versus the other quarters, as companies spend more time preparing their quarterly and annual numbers.
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