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Two Ways To Play: Tape Fear


Strengthen your portfolio in good times and bad.

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


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!
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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