MV Weather Report: Mark-to-Market Clouds Unlikely to Lift
Rain or shine, we review the day's biggest stock stories.
The S&P 500 closed at 721 - practically unchanged. However, it was the first 2-day winning streak for the market since early February. Yesterday, we talked about what Bennet Sedacca was doing; today, Bennet said on the Buzz and Banter that he's taking profits in the XLF and GECC preferreds and hybrids. If you were able to catch the rally, today was a good day to at least take some profits.
According to Minyanville's newest professor, Steve Smith, the action in the options market wasn't very bullish. Here is what he had to say.
"And in the actions speak louder than words department, a good chunk of the call buying bottom fishers were doing over the past few days is now being liquidated. This is particularly true in the financials.
"Even as shares of Morgan Stanley (MS) add to yesterday's 20% pop people are dumping call options. The April $25 call has seen over 20,000 contracts trade against prior open interest of 31,000 contracts.
"About 80% of the volume was done at the bid price suggesting this is selling. If it's not liquidation then it's probably someone writing calls against their long stock. Adding to the cautious picture is that there was fresh buying in the March $22 put which has traded over 14,000 times against prior open interest of just 415 contracts.
"In Citigroup (C) it looks like people are also willing to take what ever relief yesterday's rally offered as there has been heavy call selling across the board. The popular trade seems to be selling the June $2.50 call and the September $3 call each for around 30 cents. Again, my guess is this is overwriting against long stock.
"For my part, even though I'm keeping a skeptical eye towards the sustainability of this rally, I'm not above having some fear of 'missing the move.'"
Steve is right; I think some people have "a fear of missing the move." Which is most likely why there were buyers at the open today. Even though a rally never materialized, it's positive that, once the market started selling off, a low was found at 715.
Tomorrow may be the biggest day of the week. There is econpmic data out at 8:30 (Retail Sales, Initial Jobless Claims, Continuing Claims, and Business Inventories).
Investors will be paying the most attention, however, to the mark-to-market meeting - but I wouldn't expect many big changes to the accounting rules, Ben Bernanke and Tim Geithner are both against suspension - which tells me it won't happen.
Traders should watch out for a potential sell-the-news scenario. Though the market is still oversold, the trend lately has been to sell on any news.
Who knows - maybe there's no news at all. Would that make the buyers come?
Have a great night, Minyans!
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