Bulls Quietly Come Back and Claim a Small Win on the Session
It was a relatively quiet afternoon, as stocks recovered from some early selling pressure to end the session up a few points. European sovereign debt concerns remain with the market, but even that has not really dented the broader indices. As we have been saying since Friday, "For the week of November 8, we may see some consolidation of the recent move due to a sparse lineup of catalysts. However, any dip is widely expected to be mild and could be a buying opportunity as we have had a tough time building momentum to the downside."
Today's afternoon rally was led by financials and most cyclicals, which all outperformed, while defensive sectors lagged. Financials were up over 1.4%, outperforming on a rotation out of European banks into large cap and regional domestic banks, as well as strength in the REITs. Tech was slightly below the tape on weakness in the semiconductors and healthcare was flat, underperforming on weakness in retail drug stores, services, and the pharmaceuticals
Copper and Gold closed lower on the day, although off their lows, as the U.S. dollar weakened. The EIA reported that Crude Oil rallied off the DOE Crude Oil & Gasoline inventories coming in at a smaller build than expected. Natural Gas briefly spiked as the EIA Natural Gas Storage report showed a smaller injection than anticipated, though continued its weakness from the morning and lost on the session.
The Dow Jones Industrial Average ended up 10.29 points, or 0.09%, to close at 11,357. The S&P 500 rose 5.31 points, or 0.44%, to close at 1218, and the Nasdaq was up 15.80 points, or 0.62%, to finish at 2578.
CBOE Volatility IndexI:VIX November 20 calls were active on low volatility, a possible hedge to a higher VIX. VIX closed down $0.61, at $18.47, trading in a 7% price range today. Overall put volume of 106,000 contracts compared to call volume of 146,000, with December 21 puts as the most active series on 47,200 contracts.
The SPDR S&P 500 ETF (SPY) - Get Report closed up $0.49, at $122.10, on overall put volume of 1.2 million contracts trading as compared to call volume of 593,000, with December 118 puts as the most active series on 120,800 contracts. The November 122 weekly straddle is priced at $1.13, below a level of $1.53 from yesterday as stocks trade in a tight range into Friday's expiration. The tight trading range and lower volatility suggests short premium traders are winning more than long premium traders. November monthly put option implied volatility is at 14 and December is at 15 versus its 26-week average of 23.
PowerShares QQQ Trust (QQQQ) closed up $0.27, at $53.72. Overall put volume of 223,000 contracts compared to call volume of 208,000, with November 52 puts as the most active series on 40,200 contracts. the Buyer of the put option expects that the underlying asset will drop below the exercise price of 52 before the expiration on November 20. November monthly put volatility is at 19 and December is at 20 versus its 26-week average of 25. Low volatility suggests traders are pricing options on the expectations of decreasing price movement.
Veterans Day falls on Thursday, November 11, and while the stock and futures markets are open, other agencies are closed, therefore there is no economic data expected.
The following notable companies are expected to report tomorrow before the open: (Alibaba, KSS, Telefonica, Repsol, SI, THI, VIA; after the close: CPKI, DIS, MSCC, NVDA, SPWRA.
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