Stocks struggled to find direction, on light volume, ending the day in the red despite the flurry of M&A activity. Although selling was not panicked, investors banked some profits from the gains of last week. Sentiment still remains cautious on the economic recovery and outlook, as indicated by anemic volume and lack of conviction. The Dow Jones Industrial Average ended down 48.22 points, or 0.44%, to close at 10,812. The S&P 500 lost 6.51 points, or 0.57%, to close at 1142, and the Nasdaq was down 11.45 points, or 0.48%, to finish at 2369.

The increased uncertainty likely contributed to gold prices that inched closer to the $1,300-an-ounce mark. The December gold contract settled at $1298.6 an ounce, while oil fell below $76 per barrel.

The CBOE Volatility IndexI:VIX closed up $0.83, at $22.54, with October upside calls active on expectations of a VIX spike. Put volume of 49,000 contracts compared to call volume of 86,000. October 30 calls are active on 19,000 contracts and October 20 puts are active on 11,000 contracts, suggesting traders foresee a possibility of the VIX having a greater chance of rising above $30.00 than falling below $20.00.

The SPDR S&P 500 ETF (SPY) - Get Report closed down $0.55, at $114.27, after touching $115.00 in pre-market trading. Put volume of 832,000 contracts compared to call volume of 518,000. SPY October 114 puts were the most active, trading 105,000 contracts, with volatility at a low level of 19.5. SPY near-term support line is at $113.80.

The PowerShares QQQ Trust (QQQQ) closed down $0.27, at $49.39, with put volume of 173,000 contracts compared to call volume of 90,000. QQQQ October at-the-money put option implied volatility of 22 is below its three-month average of 26. QQQQ October 48 puts traded 6,000 contracts, closing at a volatility of 25. November 46 puts were active on 13,000 contracts, closing at a volatility of 27, indicating traders are willing to pay more for downside hedges than at-the-money options.

Looking ahead to Tuesday, the following economic data is expected to be released: ICSC-Goldman Store Sales at 7:45 a.m. EDT, Redbook at 8:55 a.m. EDT, S&P Case-Shiller HPI at 9:00 a.m. EDT, Consumer Confidence and State Street Investor Confidence Index 10:00 a.m. EDT. The corporate calendar is quiet tomorrow with Walgreen (WAG) scheduled to report.

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