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VIX Falls Below 26

Directional positions are not warranted, and there is no conviction in this market.

Stocks ended down Friday on light volume, but significantly off earlier losses, as the Nasdaq turned slightly higher. Concerns about the economic recovery and the bearish action in August options expiration, weighed on market sentiment. The Dow Jones Industrial Average ended down 57.59 points, or 0.56%, to close at 10,213. The S&P 500 lost 3.94 points, or 0.37%, to close at 1071, and the Nasdaq was up 0.81 points, or 0.04%, to finish at 2179.

The CBOE Volatility Index (I:VIX) fell below 26. As the market rallied into the close, traders purchased VIX puts, forcing the VIX to decline. The VIX was down 0.95 points, or 3.59%, to close at 25.55, after trading at an intra-day high of 27. VIX call volume was 197,000 contracts, versus 107,000 puts contracts. For the week overall, the VIX and VXO were in a trading range as well. Intraday highs and lows have bound the VIX moves to the 22-28 range. The tight VIX, coupled with the fact that the SPX met strong resistance at around 1100 and got pushed down to the 1070 support level, indicates that directional positions are not warranted, and there is no conviction in this market.

The SPDR Gold Trust (GLD) - Get SPDR Gold Shares ETF Report was down $0.42, or 0.35%, to close at $119.97 and gold was down 0.51%, to close at $1,229.10. September put option implied volatility is at 17, October is at 20 and December is at 21; versus its 26-week average of 23, suggesting decreasing near-term price movement. Options were active on 110,000 call contracts, versus 104,000 puts. Low GLD volatility and equal call/put volume, suggests traders and investors expect a stable price environment. GLD has support at $118.35.

Looking ahead to Monday, there is no economic data and the earnings calendar is light. There are three major pieces of economic data, however, to be released later in the week. Existing home sales is due out on Tuesday at 10 a.m. EDT, Durable Goods on Wednesday at 8:30 a.m. EDT and the GDP report on Friday at 8:30 a.m. EDT. Notable companies reporting next week include: Medtronic (MDT) - Get Medtronic plc. Report, JCrew (JCG) , Toll Brothers (TOL) - Get Toll Brothers Inc. Report, American Eagle (AEO) - Get American Eagle Outfitters Inc. Report and Tiffany (TIF) - Get Tiffany & Co. Report.

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