Eyes on the VIX

Bloomberg reports a day after the Dow Jones Industrial Average dropped to its lowest levels since September 2006, traders are skeptical that stocks have reached a near-term bottom due to a closely watched gauge of price volatility.

The CBOE Volatility index, or VIX, jumped 13% yesterday to 23.93, but was still far below its March high of 32.24 when the Federal Reserve led a bailout of Bear Stearns. Analysts see the index as a measure of fear in the market place, and believe until it reaches that level, stocks will have further to fall. For more, see Prof. Adam Warner’s Trading the Vix.

From the Bull Pen: What happens to stocks like Kroger (KR) when the tape turns higher? Those bullish can play this stock, sell-stops can be set below $28.

From the Bear Cave: The bank index (BKX) is another key gauge that traders are watching. Should the index fall below $60, bears can expect stocks to follow. Zion (ZION) is an option, if and when.


Consumers on Watch

Bloomberg reports consumer spending jumped in May as tax rebates spurred the biggest gain in incomes in almost three years. The Commerce Department said today spending rose 0.8% which was the biggest since November. Incomes grew 1.9%, the most since fall of 2005. These were both above economists’ expectations of a 0.7% and 0.4% gain respectively. Investors will get more hints of the health of the consumer when the Reuters/University of Michigan Consumer Confidence report is released at 10:00 AM EST. For more trading context, see Todd’s Random Thoughts: The Precipice of Pain.

From the Bull Pen: Will Wal-Mart (WMT) complete a double-bottom at $55? Bulls can test the upside should the stock fall to that level.

From the Bear Cave: Will Gymboree (GYMB) be able to hold onto its gains in this retail environment? Those bearish can set buy-stops above $43 in the near-term.


For more ideas in real time throughout the trading day, check out Minyanville’s Buzz & Banter.


Quick Check Around the World

Asian trading closed with the Hang Seng -1.84%, Nikkei -2.01%, Sensex -4.30%, Taiwan -3.37% and Shanghai -5.29%.

A quick check across the pond finds the CAC -0.65%, DAX -0.92%, FTSE -0.33%

As of 840 AM EST, S&P Futures are lower -1.30 points to 1283, and Nasdaq futures are lower -6 points to 1860.


A Look At Commodities

Commodities are higher. Crude oil is trading +1.61 to 141.28. Gold is up +8.50 to 923.60. Silver is higher +0.315 to 17.440, and copper is up +1.05 to 384.05.

The dollar index is lower -0.079 to 72.405.


On the Radar

Economics

Personal Income: 1.9% vs. 0.4% cons.
Personal Spending: 0.8% vs. 0.7% cons.
PCE Deflator (y/y): 3.1% vs. 3.2% cons.
PCE Core (m/m): 0.1% vs. 0.2% cons.
PCE Core (y/y): 2.1% vs. 2.2% cons.

10:00 U. of Michigan Confidence: 56.7 cons.


It’s Friday. Good luck and have a great weekend!