Chris Tyler, Optionetics.com
December 30, 2010

A light flurry of “bah humbug” selling despite upbeat economic data keeps window dressing efforts contained in Thursday’s first half. As of 10:45 ET the SP-500 (SPY) is off a rather mild 0.13% in more of the same, “2011 can’t get here soon enough”, difficult-to-handle and “VIX’ing” price behavior.

On the economic front, better-than-expected weekly claims, manufacturing and pending home sales data are being treated skeptically according to some analysts. Others might arguably point to 17 of 20 days of market prices grinding higher as reason enough to “sell the news” without rocking the boat’s or umm sled’s, in-place window dressing.

For the week ended Christmas day, first time filings for unemployment benefits fell by a much larger 34,000 to 388,000 compared to Street estimates of 415,000. The report is being taken with a grain of salt or maybe a dash of coal due to the holiday and freeze on transportation over much of the US related to Mother Nature’s own snow job of sorts.

Intraday, the Chicago PMI saw a surprise jump to 68.6. The regional manufacturing data was expected to reflect a slight dip to 61.5 from the prior month’s 62.5 reading.

Separately and minutes later, pending home sales data offering headline delights has also failed to capture the spirit of the season with bulls. Economists estimating a drop of -3.0% from October’s buoyant 10.1% increase were pleased to learn sales actually grew by 3.5% during November.

“Let’s not make a big stink of it?” In other stories playing to a mostly empty house, the Aggies (MOO) are seeing a second session of “smelling like roses” relative strength. Shares of Mosaic (MOS), Intrepid (IPI), Potash (POT) and Agrium (AGU) have benefited from bullish comments from peer Bunge (BG) whose CEO stated tight grain supplies should keep prices firm through 2011.

Not hurting bulls chances either, technically the Aggie group has done a thorough job of underperforming the broader market the past couple months. During that period, nicely-shaped cup style bases have acted as strong platforms for higher share prices with confirmed breakouts on heavy volume the flavor of the day Wednesday.

In those sometimes accurate heat-seeking option markets, contract volume for the Aggies is light thus far with no unusual trading, despite shares seeing a bit of bullish follow-through and still near those sometimes coveted “proper buy points” espoused by the likes of IBD.

Acting as confirmation though, Wednesday’s technical breakouts did find strong interest on the part of investors as option trading soared for the group.

Most active, Agrium saw a jump of about 1,200% on 25,000 contracts, Mosaic’s options saw nearly 53,000 change hands compared to an average tally of 8,000 and Potash volume cleared 100,000 on a 500% increase.

Put-to-call readings in Mosaic and Potash were near two-to-one while Agrium actually saw its puts receiving slight favor with 12 trading for every 10 calls.

While the former two coupled with slight increases in implieds suggest bullish efforts on a whole, Agrium’s ratio isn’t necessarily bearish. Strategies such as married puts or collars which incorporate long stock with a protective put and call sale are the risk equivalents of long call or bullish vertical positions. Just some food for thought that also looks tasty to this option strategist.

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site