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Stocks rallied for the fourth straight day, with the Dow eliminating its 2010 loss and trading above its highest close in more than a month. Equities were up on a weaker dollar after China's industrial output increased and Basel III gave banks as much as eight years to meet capital requirements. The Dow Jones Industrial Average ended up 81.36 points, or 0.78%, to close at 10,544. The S&P 500 gained 12.35 points, or 1.11%, to close at 1121, and the Nasdaq was up 43.23 points, or 1.93%, to finish at 2285.

The CBOE Volatility IndexI:VIX was down 3.55%, near a five-month low. The index closed down $0.78, at $21.21, below its 200-day moving average. The intra-day low for the VIX is $20.93, a level the VIX had not traded since May 3. Traders expect the VIX to continue to trend lower. VIX put volume of 231,000 contracts compares to call volume of 135,000, with October 20 and 24 puts active.

Hedged short-premium spread traders cheer as volatility decreases and the market rallies into expiration. The SPDR S&P 500 ETF (SPY) - Get SPDR S&P 500 ETF Trust Report closed up $1.24, at $112.72. The SPY's 1.1% rally confirmed to technical traders that the SPY will stay above its 200-day moving average of $111.79. SPY is currently trading above its 50, 100 and 200-day moving averages, the first time since May 16. SPY put volume of 888,000 contracts, compares to call volume of 610,000, with October 109 and October 112 puts active.

The PowerShares QQQ Trust (QQQQ) closed up $0.65, at $47.25. QQQQ October put option implied volatility is at 21 and November is at 23, below its three-month average of 26, suggesting decreasing price movement. QQQQ is trading above its 50, 100 and 200-day moving averages, suggesting upward price momentum. QQQQ put option of 295,000 contacts compares to 170,000 calls, with active spreading volume in the money October and November 47 puts.

Looking ahead to Tuesday: ISCS-Goldman Store Sales 7:45 a.m. EDT, Retail Sales 8:30 a.m. EDT, Redbook 8:55 a.m. EDT, Business Inventories 10 a.m. EDT. The earnings calendar is light with the following notable companies reporting: Best Buy (BBY) - Get Best Buy Co., Inc. Report, Kroger (KR) - Get Kroger Co. Report and Pall (PLL) - Get Piedmont Lithium Inc Report.

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