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TFC Commodity Trading Forum

Wall Street's Tuesday Lunch Options

Chris Tyler, Optionetics.com
February 15, 2011

With “a double” of bulls collective pleasure tasted or tagged, Tuesday’s flurry of mixed global economic data assists “Profit-Taking!” headlines against key resistance; well for the time being. As of 10:45 ET the SP-500 (SPY) is off -0.50% in slightly devilish trade below 1333 but well-removed from 2009’s 666 anxieties.

On a very busy and varied economic front this morning, bulls received a mixed blessing from Monday’s supportive bout of speculative optimism tied to China’s CPI and PPI data. For January, consumer prices rose by a milder than forecast but still hot 4.9% compared to December’s 4.6%.

China’s PPI data rose an even sharper 6.6% on top of the prior month’s 5.9% and also, disappointingly came in above forecasts of 6.1%.

The combined increases will likely force the country’s central bank to stick with its program of incremental rate hikes. However, signs of slowing money growth due to its monetary tightening thus far have begun to work towards cooling down its economy.

Elsewhere and from around the globe, Japan buoyed spirits if not prices this morning after announcing a pickup in industrial production, no shift in interest rates by its central bank and officials deciding to upgrade their outlook on its economy by stating the country is “gradually emerging from a slowdown.”

From across the other pond, Germany and France’s Q4 GDP’s rose by 0.4% while the broader Eurozone saw an increase of 0.3%. And February’s Eurozone ZEW business sentiment or “investor morale” survey gained ground to 29.5 from a prior reading of 25.4, while Germany’s gauge rose by a milder 15.7 from 15.4.

Stateside, January’s sneak peek or advance retail sales came in with lighter than expected growth of 0.3% compared to forecasts of 0.5%. Axing autos and a similar gain of 0.3% versus estimates of 0.6% has been transcribed into some official journal needing to keep historic data on such things.

Separately, February’s Empire survey matched estimates of 15.5 with its just shy reading of 15.4 while improving upon January’s 11.9 level. And import prices for January rose 1.5% compared to December’s 1.2%.

In those often intertwined markets of influence, Tuesday’s price action is largely mixed. Shares of the 20-Year (TLT) are up by a narrow 0.20% as it attempts a third day of gains by bulls looking to challenge a bearish trend with a potential triple bottom of about 20 months in length.

COMEX Gold (GLD) is showing a rare slightly more precious bid relative to the iShares Silver Trust (SLV). Shares of GLD are up 0.80% as it tests 50SMA and prior uptrend resistance. A typically leading SLV is up a slighter 0.45% but improving upon its “short” handle breakout within its optimistically-described cup-shaped weekly base.

The US Dollar (UUP) is fractionally lower but contained to inside day warfare, while the US Oil Fund (USO) continues its technical mission of testing critical uptrend support regurgitated almost daily on these pages.

In corporate news, shares of economic barometer and air / ground transport giant FedEx (FDX) are up about 2% after kinda, sorta but not really disappointing investors with its reduced weather-related outlook.

Technically, shares are staging a breakout from a two and one-half month tight lateral base after the company warned it sees third quarter earnings of $0.70 - $0.90 per share versus Street views of $1.04.

Shares of NYSE Euronext (NYX) are off -2.80% but the action follows four days of rousing good upside anticipation of today’s now confirmed partnership with the Deutsche Boerse AG to combine their trading operations.

One share of NYX stock will be exchanged for 0.47 shares of the new entity’s stock while Deutsche Boerse shareholders will receive one share for each share owned. The merger is expected to generate cost savings of 25% after one year and 100% by the end of the third year for the soon-to-be created Dutch holding company and one expected to trade in Frankfurt, New York and Paris.

Finally and in those sometimes accurate heat-seeking option markets of notice, the CBOE Volatility Index ($VIX) is up nearly 4% on increased signs of agitation from bulls and maybe bears too. However, Tuesday’s bid at 16.25% is far from reversing the market’s most widely followed sentiment gauge from its still more complacent than not levels of business as usual; to the more unusual of late, fearful variety.

As much and in lieu of the market’s uncorrected run of more than 13 weeks since November’s now minor-looking pullback and part of a larger near 25 week price into slightly devilish double just below 1333 and well-removed from 2009’s 666 anxieties; protective strategies such as married puts or stock substitutions make decent enough sense and likely cents too.

Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site