Pages



• OptionsU Blog Homepage
  Options University Homepage
  Contact Us

• Categories

  • Option Trading Articles
  • Market Snapshots
  • Beginner Options Trading
  • Intermediate Options Trading
  • Advanced Options Trading
  • Options Q&A's
  • Video Updates

• Archives

  • February 2012
  • January 2012
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • October 2009
  • September 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007

• Recent Posts

  • Volatility Perks Up, Despite Strong US Economic Data
  • Stronger Stocks Pull Volatility Down to 8 Month Low
  • US Equity Markets Show Positive Earnings
  • Strong Earning and Fed Sink Volatility
  • Implied Volatility in January
  • US Remains Resilient, but for How Long?
  • Volatility Softens as 2012 Begins
  • Employment Data Fails to Push Stocks Higher
  • Stocks Rally After BOE Bond Purchase Announcement
  • Volatility Softens Despite Continued Downward Pressure on Equities

Press Release

• Timely Intensive Options Trading Workshop With Renowned Experts Presented by Options University
  Options University Reports Recent Market Volatility Causes Boom in Options Training
  Recent Market Plunge is the Most Severe Drop Since 9/11 - Investors Can Protect Their Investments and Profit in an Unstable Market
  Options Mastery Series Re-released March 1st Due to High Demand
  New Options Trading Video Library, The Options Mastery Series, Sells Out In One Week - Limited Re-release in March 2007
  Investors Profit Despite Stock Market Volatility With Options Trading
  SEC’s Proposed Drastic Rule Change Will Free Up More Money for Investors
  NASDAQ’s Entry into the Options Market Favors Individual Investors
  Major Recent Nasdaq News Release:
  Trend Alert: Aging Baby Boomers Turn to Options Trading (Risky or Not)

Our Blog Partners



• 
• 
• 

Bookmarking

Add to Onlywire

Feeds

If this is your first time visiting, subscribe to our RSS feed.

Equity markets rose on Friday as oil prices pushed producers and miners higher, dragging the major averages higher.  The continued anxiety over a potential Greek debt restructuring weighed on the markets during the week, generating a tight trading range for riskier assets. Economic data was mixed with as both Consumer Spending and Existing Home sales were released.

Consumer spending increased by 0.4%, less than March’s downwardly revised 0.5% gain, the Commerce Department said Friday. And when
adjusted for inflation, spending went up only 0.1% for a second month in a row. Incomes rose by 0.4% a third straight month. Economists had estimated spending would climb by 0.5% and incomes by 0.4% in April.

The economy slowed considerably in the first three months of 2011, partly because consumers cut their spending amid higher commodity prices. Spending is a big part of U.S. economic activity. Many economists have said the price increases will prove transitory and indeed commodity prices fell off their late-April peak. But Friday’s report indicates consumers weren’t spending fiercely at the beginning of the second quarter. Friday’s data showed the price index for personal consumption expenditures increased 2.2% on a year-over-year basis, after rising 1.8% in March. Compared to the prior month, the gauge rose 0.3% in April.

Pending home sales tumbled 11.6% last month, according to the National Association of Realtors, representing the latest sign that the battered sector is struggling to rebound. Economists had expected a 2% decline. The pending sales index is 26.5% below its level in April 2010, which is when a tax subsidy for first-time home buyers expired.

All eyes are on today’s hot new option listing, LinkedIn. Results of yesterday’s prelisting survey show that OptionAlert users who responded expect atm IV in the 50-60% range and vols to be lower a month from now. Expected discount to parity is $1, and the average volume estimate for today is a healthy 46K calls and 89K puts.

CBOE Volatility Index (.VIX) was down .47 to 15.67 and, after four-day slide, almost 22 percent below the levels seen at the opening bell Monday. Implied vols have been falling market-wide since Monday and heading into the three-day Memorial Day break. In VIX options trading today, August 50 calls are seeing noteworthy volume. 82,700 have traded so far against open interest of 1,470 contracts. While the top trades have hit on the bid, one player bought 10,000 at 20 cents. Another 35,000 were bought at an average of 22.5 cents. Earlier in the day, 20000(10000X2) were bought at 20 cents. While the buying of these deep OTM calls might be part of a combination strategy involving other VIX options or futures, the flow does seem to reflect some expectations for a rally in the VIX through mid-August, which is historically one of the more volatile months for the equity market.

 

Equity markets in the US were mixed as weaker economic data, combined with anxiety over the restructuring of Greek debt, lead to lackluster
trading.  The strong correlation between equities and currencies continue to hold, making the markets volatile and choppy.

In economic news, Orders Durable Goods,  declined  in April because of car production disruptions after the Japan earthquake and falling demand for airplanes.  Durable goods designed to last at least three years decreased 3.6% to $189.89 billion, according to the Commerce Department. Shipments of these so-called durable goods also fell, down 1.0%.

Economists surveyed had predicted a 2.1% decline in orders for durables during April. The decline was the biggest since October 2010.
Commercial aircraft orders plunged, and orders for automobiles and parts dropped sharply. Excluding transportation, durable goods orders last month fell 1.5%, following a 2.5% climb in March.

New orders for nondefense capital goods excluding aircraft dropped 2.6% last month. The orders are a barometer of capital spending by
businesses and represent an important gauge of how manufacturing is doing. The drop in durables last month followed a 4.4% surge in March. Orders fell 1.1% in February but had shot up 4.0% during January.

Cisco (CSCO) shares dipped to new 52-week lows of $16.15 today after the company updated its fourth quarter revenue guidance in a 10-Q
filing. Meanwhile, 41,000 calls and 3,300 puts traded in the networking giant in the first 30 minutes of the trading session. The Sep 19 calls were today’s most actively traded equity options contract with more than 15,000 on the tape so far. Cisco July 16 and 17.5 calls are active, with 5,192 and 5,273 traded, respectively, and 97 percent of the volume trading at the ask. The overall flow in Cisco early seems somewhat bullish, even as shares fall to their lowest levels since March 2009.

El Paso (EP) has added another 91 cents to $21.13, the day after the natural gas producer announced plans to split itself into two publicly traded companies. Shares are in the midst of a two-day 11.3 percent rally and moving to new 52-week highs. Some shareholders might be looking to hedge their bets, as a block of 10000 Jun 17 puts was bought this morning at a nickel. It might be a closing trade, however, as the contract is almost 20 percent OTM and open interest is suffiicient to cover. The next biggest trade is a Jun 18 – 21 call spread apparently sold at $2.30, 4915X on CBOE and might also be a closing spread, as both contracts are now ITM. A June 20 – 21 call spread traded at 60 cents, 4676X on ISE, and is possibly offsetting as well. 37,000 calls and 21,000 puts now traded in EP.

The VIX closed slightly lower moving down to the 17 handle as implied volatility continued to slide moving below the 50-day moving average
after testing the 20% level on Monday.

Equity markets continued to remain volatile as issues related to European debt continued to dominate market sentiment.  The VIX volatility index broke out of its current range closing above the 200-day moving average which points to upward momentum in implied volatility.

Oil prices were lower as the dollar rallied against most major currencies.  Crude oil moved down 2.4%. Asian equities plunged, with regional benchmark dropping to a 2-month low as the MSCI Asia Pacific index fell by 2.2%.  Losses in Asia were compounded by the moderation of China’s flash PMI.  Amid the stock market selloff and widening of periphery yields spreads, bund and gilt futures hit new contract highs, while the US 10-year yield came within a whisker of last week’s trend low.

Euro zone political issues continue to remain an important downside risk for the euro and are likely to pose a potential temporary headwind for the euro, despite the supportive outlook for the ECB. The ongoing debate over Greece’s unsustainable debt trajectory, coupled with news over the weekend of S&P’s downgrade of Italy’s rating outlook have the potential to continue to weigh on euro zone market sentiment as the sovereign issues remain on the fore front of investors’ minds. Softer than expected PMI data has compounded these fears. Equally, important, further periphery strains are in turn likely to lead to a flight to quality of German bonds, which reduce the relative interest rate spread between the US and Germany and thus support the dollar.  The 2-year German-US spread, for instance, has narrowed by 11 basis points over the past three trading days, coinciding with the euro’s 2% loss.

Gold prices continued to remain robust with the SPDR Gold Trust (GLD) adding to gains after gold gained $5.60 to $1,514.50 an ounce. In
options action, a noteworthy recent trade in GLD is a Jun 140 – 145 put spread at $1, 20000X on ISE. Sentiment data indicate half of the spread was bought-to-open and this looks like a bearish play on gold, or perhaps a short-term hedge. The spread offers a $4 pay-off if shares fall to $140 or below through the Jun expiration, which represents a 5.2 percent drop in the price of gold over the next 25 days.

In heavy trading Krispy Kreme (KKD) adds $1.63 to $8.03 after the donut shop reported a quarterly profit of 13 cents per share, which
beat Street estimates by four pennies. Options on Krispy Kreme are seeing brisk trading as well. 10,000 calls and 1,260 puts on the session. The top trades of the day appear to be a spread, in which 2,000 August 7.5 calls were sold and 2,000 August 10 calls bought, which is possibly rolling of a bullish position from in-the-money to out-of-the-money call options.Jun 7.5, Nov 7.5 and Nov 10 calls are seeing interest as well. Meanwhile, implied volatility in KKD is down about 11.5 percent to 55.5.

Peripheral yields soared on Friday with the yield on Greece’s 10-year government bond rising to record levels as speculation that of a default continued to gain steam. Fitch Ratings downgraded Greece’s credit ratings three notches, citing the scale of the country’s challenge in securing debt solvency. At the same time yields on the equivalent German note, eased to 3.12 per cent as Bunds were sought as safe havens.

The debate over whether Athens should restructure its debt intensified this week as top euro-zone finance ministers met. There was opposition to restructuring from the European Central Bank, and even Angela Merkel, German chancellor, ruled out any immediate reordering of Greece’s
repayments.

The dollar gained strength on Friday as investors re-focused on a potential Greek re-structuring of debt and the weekends Spanish elections.  Spain holds local and regional elections on Sunday ahead of the national election next year.  Socialist Prime Minister Zapatero has already
indicated he will not seek re-election.

The National Bank of Greece (NBG) saw 7X the average daily options volume, being driven by apparent rolling activity. One investor sold
2000 May 1.74 puts at 38 cents and 5,000 May 1.5 puts at $1.50 to buy 8,000 Jun 1.5 puts at 26 cents. Some of the May puts were opened on May 6 when open interest in NBG puts increased to 53.4K from 43.4K. Shares are off nearly 5 percent since the positions were opened. Today’s roll might reflect expectations for additional weakness in shares of the Greek bank over the next four weeks.

Gold prices moved higher during the week, as investors continue to believe that higher inflation is likely to seep into global economies making hard assets such as gold a beneficial asset to hold in a portfolio. As financial turbulence in Europe deepened toward the end of the week, demand for precious metals as a safe haven gained strength.

Option volume in gold-related names was well above normal Friday, with a number of stocks (AUY, GFI, GOLD) following the metal lower until 10am and then reversing course. In AUY, paper bought 6500 each of the July 14 and 15 calls, against a sale of Oct 13 and 14 calls (both opening) for a net 94 cent credit, and in GFI paper sold the Jul 17-20 call spd 20000x for 1.45, opening the 17s. And in the GLD Gold SPDR, May 146 and 147 calls are active, with someone scooping up a few thousand May 147 calls for 4 and 5cents when GLD was near its lows.

Although the equity markets were off of their lows, there was defensive action in the technology sector. Bearish spreads in the Powershares QQQ trades. The Qs are were down and action saw one investor purchase 43,000 QQQ Aug 57 puts at $1.84 and sold 66,000 August 51 puts at 51 cents (23K traded at 52 cents). The bearish ratio spread is opening and appears to be targeting a move to $51 through the expiration. Separately, the QQQ Aug 52 – 58 put spread is bought at $1.61, 20000X.

US equity markets rebounded higher as commodity prices lead by crude oil bounced more than $3 dollar per barrel. Dells better than expected earnings after the bell on Tuesday, also helped drive the Nasdaq higher. The relatively calm and constructive FOMC minutes gave investors confidence, which lead to higher stocks prices.

Federal Reserve officials seemed to agree at their last meeting that letting the central bank’s balance sheet slowly shrink was the first step toward tightening monetary policy. They stated that they were not ready to start executing the plan until they are sure the economy can bear it, according to minutes of the April 26-27 Federal Open Market Committee meeting.

Fed officials had an extensive discussion about their exit strategy, which carries much uncertainty because it never has been done before. Fed officials have indicated the process is likely to be gradual and must be flexible because conditions may change.

Shares of Dell were higher after the computer maker reported a big jump in profit last quarter and raised its operating profit outlook for the rest of the year. The world’s No. 2 computer maker said per-share profit minus items jumped 83% to 55 cents from 30 cents in the year-earlier quarter. Analysts polled were expecting 44 cents. The company said sales for its fiscal first quarter ended April 29 rose 1% to $15 billion, just shy of the $15.4 billion analysts expected. Dell raised its guidance for operating profit for the year, after reporting Q1 operating profit that rose 8.1% to $1.2 billion.

Heavy volume in Dell options following better-than-expected earnings and upward guidance today. Shares are up 5 percent to $16.70 after setting an early 52wk high of $16.94 five minutes into the day. 47K calls and 28K puts have traded in the first hour and fifteen minutes, with May and June 17 calls leading the most actives. Flow into earnings had been heavily put weighted, with more than 50K contracts of OI at the May 15 put line this morning. Today, however, the May 17 calls are the most actives. 11,940 traded. The contract was trading at 10 cents late-yesterday and is bid at 11 cents today. Although shares saw a nice post-earnings pop, the contract remains (2.4 percent) OTM and implied volatility crush has taken its toll, resulting in only a small profit for call holders. Implied volatility in DELL is off 28.5 percent to 29.5.

The VIX traded lower after failing yesterday to close above the 50-day moving average, settling close to 16.25.  The volatility index is trading in a 2 points range over the past two weeks, and higher prices in equities generally equate to lower volatility.

Equity markets in the US gyrated, moving higher early in the day before moving lower, as investors continued to focus on a Greek debt restructuring and sliding crude oil and gasoline prices.  The markets were lead lower by materials and miners.

Weak housing data along with news of the arrest of International Monetary Fund Managing Director Dominique Strauss-Kahn on sexual-assault charges, created market uncertainty. There are concerns his arrest would weaken the IMF’s ability to resolve the euro-zone debt crisis. The IMF chief was ordered held without bail.  The NABH housing survey remained unchanged at 16, compared to expectations that it would climb to a level of 17.

Additionally, investors had to absorb the government hitting its debt ceiling.  Hitting  the $14.294 trillion debt ceiling Monday, will set  in motion an uncertain, 11-week scramble to avoid a default.  The Treasury Department announced  Monday it will stop issuing and reinvesting government securities in certain government pension plans, part of a series of steps designed to delay a default until Aug. 2, 2011. The Treasury’s moves buy time for the White House and congressional leaders to reach a deficit-reduction agreement.

Volatility has been hitting the retail space.  JC Penney reported earnings before the bell this morning and shares initially gapped higher, popping nearly 6% to $41, but reversed and are down nearly 2%.  Option volume was 4x the daily average with some 12,500 puts to 3,500 calls traded. The most active strikes were the June $37, 38 and $39 strikes. The notable trade was a spreading in the June $40/$38 puts which traded 1,180 times in what looks like part of a roll up downside protection as the 2,100 of the $37 puts were sold to close.

Commodity markets were again extremely volatile with gasoline futures leading the entire oil complex lower.  The news over the weekend that the Arm Core of Engineers opened numerous spillways in Louisiana reduced some of the perceived pressure on gasoline production for the refineries on the Mississippi river.  Traders had concern that a flood would effect this region which produces over 12% of US daily supply.  Gasoline prices dropped more than 15 cents per gallon or 5%, pulling crude oil down more than $2 dollars per barrel to close near $97.00.

Implied volatility continue to move higher in today’s trading, with the VIX pushing up to the 50-day moving average near 18.00.  The 50-day moving average has acted as strong resistance since the VIX crossed below it in mid March.

The Nasdaq VIX is approaching its 50-day moving average and close near 19.50 the highest close in the past 2 weeks.  Technology stocks were hit hard with heavy action in Yahoo.  Yahoo (YHOO) moved lower and have now lost more than 15 percent since May 9, the day the stock notched a new 52-week high. Shares have been under pressure during the past two days following news that Alibaba spun off control of its Alipay online payment unit without informing Yahoo. Alibiba is 43 percent owned by Yahoo and the Chinese unit is considered an important investment for the Internet search giant. Shares are under pressure following the riff and options have been actively traded as well. The top trade in Yahoo is a January 12.5 – 17.5 risk-reversal, which traded at $1.08, 5000X. The next biggest trades are two blocks of 4,000 (8,000 total) July 14 puts on the 19 and 20 cent bid.

Equity markets moved lower on Friday after gyrating for most of the week.  Positive consumer sentiment, in line consumer prices and a rebound in energy prices offset concerns over a Greek debt restructuring.

Consumer sentiment unexpectedly strengthened in May as the University of Michigan’s preliminary consumer sentiment reading jumped to 72.4, from 69.8 in April. Economists had expected sentiment to weaken in May, to a reading of 69.5.

The consumer price index rose 0.4% in April , meeting expectations, after rising 0.5% in March. The core rate, which excludes food and energy, gained 0.2%, coming in slightly higher than the rise of 0.1% that economists had expected.  Oil and gasoline prices rebounded on Friday, added some fuel to producer and refining stocks.

US markets are also fighting headwinds of additional tightening of rates by the Chinese government.  Thursday’s increase in reserve requirements by 50 basis points to 21% was primarily a tool to mop up excess liquidity in the interbank market resulting from incomplete sterilization. Their main tools for restricting economic activity are lending quotas and credit restrictions for banks, which are also being tightened.

The energy markets experienced high volatility during the week, but that did not deter some investors and their wiliness to jump into
energy related stocks.  Big prints in the SPDR Energy Fund (XLE), which is trading high, after an investor pays $1.95 for the Sep 79 – 90 call spread, 54000X. Looks like an opening and not tied to stock. The spread has a position delta of .27 and offers a potential $9.05 pay-off if shares rally to $90 or beyond by the Sep expiration, which represents a 20.7 percent rally over the next 126 days. XLE, which holds all of
ten energy-related names from the S&P 500, has been trading lower along with crude lately and is down 7.5 percent month-to-date.

The financial stocks were under a lot of pressure during the week as regulators continue to swarm over wall street.  Goldman Sachs (GS) moved lower, the day after Rochdale analyst Dick Bove lowered his rating on the stock to Sell and said that the Justice Department is facing increasing pressure to launch a criminal lawsuit against the investment bank. GS took a 3.5 percent hit on the downgrade yesterday. Options are actively traded for a second day as well. 52,000 puts and 52,000 calls traded on the investment bank today. Weekly 140 puts, which were 35 cents OTM were the most actives. 8,530 traded. Meanwhile, the top options trade of the day is a June 135 – 145 strangle sold at $5.10, 3000X, and possibly a bet that shares will hold between those two strikes between now and the June expiration.

Volatility failed to break to the upside despite all the pressure on the equity markets during the week.  The VIX tested the 19 level earlier in the
week, but the equity markets remained above 1335, which lowered the need to purchase put protection.

Equity markets in the US were on the defensive as the dollar gained ground and commodity prices were decimated.  Gasoline prices lead the slide moving lower by more than 25 cents per gallon tripping off limits that halt trading in RBOB futures contracts.

The drop in petroleum prices prompted CME Group to briefly halt trading in crude oil, heating oil and RBOB gasoline futures amid heavy
price volatility. A note from the exchange said that contracts had hit their daily price limit, triggering circuit breakers on CME’s electronic Globex trading platform.

The Crude oil volatility index OVX, climbed more than 7% or 3 points closing above 43% and reaching highs seen in March of 2011.  The slide in commodities was triggered by an increasing dollar and a worse than expected petroleum inventory report today, released by the Department of Energy.

According to the Department of Energy, U.S. commercial crude oil inventories increased by  3.8 million barrels from the previous week. At 370.3 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.3 million barrels last week and are in the lower limit of the average range.  Additionally, motor gasoline demand which has averaged nearly 9.0 million barrels per day, was down by 2.4 percent from the same period last year.

The decline in oil prices was positive for some sectors.  45,000 calls and 25,000 puts traded in Macy’s today. Shares are up after the retailer reported quarterly earnings of 30 cents per share, which was 11 cents better than Street estimates. Macy’s also raised full year guidance and announced plans to increase its dividend. Shares are up and the top options trade is a Jun 23 – 37 strangle, apparently bought at $1.87.

UPS was also solid and seeing some ex-dividend trading today, but the top trades don’t look related to the div. Instead, an investor sold the July 65 – 80 bullish risk-reversal at 28 cents, 10000X. Looks opening and tied to 260K shares at $74.45. Deutsche Bank raised their price target on UPS to $93, citing the recent excellent Q1 earnings report .

Level 3 (LVLT) shares notch a new 52-week high of $1.93 today. The stock is up and in the midst of a four-day 19 percent run higher.
The stock’s upward trajectory has caught the attention of players in the options market. 9,130 calls and 900 puts traded in the Broomfield, CO
communication services company. January 2013 $2 calls are the most actives. 1,570 traded (93 percent Ask). Jun 1.5, jun 2, Sep 1.5, and Sep 2 calls are seeing similar action. Shares are up today after HBO selected the company to deliver network services for the HBO GO Mobile app.

The unexpected rise in the US employment data last Friday is likely to go a long way in allaying investor fears about global growth yet not strong enough to raise concerns that the Fed is likely to shift its posture on rates.  As such, relative interest rate spreads and the divergent outlook for central bank policy are likely to remain the important driver of currencies in the week ahead and indeed over the medium-term.

The US markets increase moderately, driven by a rebound in commodity prices which were hammered last week.  The US gasoline futures contracts rallied signifantly as potential floods in the mid-west could create shut-down on the colonial pipeline.  Gasoline rose more than 5%, pulling up crude oil by more than $3 dollars per barrel.

Green Mountain Coffee Roasters (GMCR), which rallied 18.6 percent on 5/4 after earnings were reported, is trading up 94 cents to $76.82.
GMCR options are seeing brisk trading. 22,000 puts and 8,400 calls so far. May 70 puts, which are 8.9 percent OTM and expire in 11 days, are the most actives. 3120 traded. Implied volatility is up 2.5 percent to 42.5.

Trading was brisk in Dollar Thrifty (DTG) after Hertz (HTZ) made a renewed bid for the auto rental company. Hertz is offering $57.60 in cash plus .8546 HTZ shares. At current levels, the deal equates to $72.16 and a 24 percent premium to a hypothetical offer announced by Avis Budget (CAR). DTG is trading up $9.12 to $78.81 and well above the Hertz bid. Meanwhile, the top options trade is a Jun 80 – 85 call spread, apparently bought at $1.30, 2000X on AMEX. A May – Jul 75 call spread was bought at $1.70, 1500X. The May and July 75 calls are the most actives.

The VIX, S&P 500 Implied volatility index settled lower close to 17, after failing to break above the 50-day moving average of the VIX near 18.50.  The Index has bounced from a low near 14.75, to 18.50 in just a week.  The continued issues related to Greek debt and European peripheral countries solvency, continues to generate volatility.

The unscheduled meeting late Friday evening between senior euro zone financial officials represents official recognition that Greece will
require additional assistance, while exit from the euro zone is unlikely at this juncture.  The meeting does not mean that Greece is exiting the euro, but that officials are reviewing various options to help Greece.

Today S&P downgraded Greece adding pressure on European debt and the currency.  The May 16 summit of European finance ministers now takes on additional importance.  Meanwhile, German export data this morning was well beyond expectations at +7.3% m-o-m, and continues to show the split in economic performance within Europe, particularly between Germany and the periphery.  Periphery 2-year yields are
higher today, including Spain’s.

The Euro fell for the 3 day in a row, following Thursday interest rate decision by the ECB.  The dovish comments from President Trichet, has taken the lust off the Euro.

 

The slide in commodities during the past week, spilled over into other riskier assets generated a round of de-leveraging in the financial markets. Silver was in the spotlight for most of the week sliding close to 16 dollars per ounce, as high frequency investors quickly exited positions. During the week, oil prices were also hammered sliding close to $16 dollars per barrel, pulling down oil producers and refiners.

The strength of the dollar was also a catalyst for the slide in the commodity sector. Dovish comments from the European Central Bank and the Bank of England took some of the shine off of the Euro and the Pound. Investors moved back into the dollar and US treasuries which are considered safe haven financial investments.

Sentiment on riskier assets received a boost on Friday morning in the US after the Department of Labor released a better than expected non-farm payroll report.  Commodity prices found footing and were able to gain ground after a week that saw some of the largest declines.  The dollar moved higher, and US interest rates increased slightly.  The S&P 500 Index moved higher but was unable to hold a 18 point climb.

Nonfarm payrolls rose by 244,000 in March as the private sector posted the strongest employment gain in five years, according to the Labor Department. The March data were revised upward to show an increase of 221,000 jobs, from a previous estimated gain of 216,000.  The unemployment rate, which is obtained from a separate household survey, rose to 9.0% last month from 8.8% in March. It was the first increase in the jobless rate since November, when it hit 9.8%.

Private hiring rose 268k.  The household survey showed a loss of 190k jobs and there was little change in the size of the labor market, thus the rise in the unemployment rate.  Government employment fell 24k.  Local government loss of 14k jobs.  Manufacturing added 29k workers
suggests increase in manufacturing output, while the rise in construction payrolls suggests an increase in construction spending.  Hourly wages rose slightly keeping consumer expenditures in check.

The strong employment reported activated some strong bids for pipeline company Williams.  An investor paid 27 cents per contract for Jan 45 calls, 50000X. Like many other commodity-related names, the natural gas producer had a rough week. Prior to today, WMB had suffered a four-day 7.4 percent skid. Earnings were reported 5/4.

Sirius XM Radio (SIRI) touches a new 52-week high today. Options volume is impressive after 52,000 calls and 8,450 puts traded in SIRI. Jan 2 calls are the most actives. 14,790 traded the contract is now 20 cents in-the-money after a 33.3 percent rally in shares since March.

The VIX volatility index soared during the week, testing the resistance level near the 50-day moving average close to 19.00  The VIX moved higher by 4.5 points close to a 31% move.  The increase designates fear within the market and the index is poised to test the next resistance at the 200-day moving average near 20.00.

Equity market in the US took a turn for the worse after the Institute of Supply Management released a softer than expected service sector report.  Economic data was not a bright spot, as ADP released a employment report that also put a dent in the US economic rebound.

ADP private-sector report showed employment in the U.S. private sector increased by 179,000 in April though the rate slowed from March’s revised level of 207,000.  Expectations were for a slightly higher 200,000 increase in new jobs.  The ADP report is likely to reaffirm market expectations that the U.S. government’s official employment data, to be reported on Friday, for April will also show approximately 200,000 new jobs.

Markets held in despite the payroll news on the open, but quickly sank after a worse than expected non-manufacturing ISM.  The ISM index sank to 52.8% from 57.3% in March according to the Institute of Supply Management. Economists surveyed had expected the ISM services index to inch up to 57.8% last month.

Commodity markets continue to move lower as the profit taking bug, as taken the premium out of the marketplace.  Silver prices have been hammered and shed 20% of its value during the last 4 trading sessions.  Miners have been hit very hard, and the slump has spilled over into the petroleum sector.

Trading volume continued to be heavy in the iShares Silver Fund (SLV). Shares are trading down $ volume approached 1.5 million contracts. The sharp decline in the metal comes after a nearly 80 percent surge since late-January. Now, players are scrambling to adjust positions. The top trades in SLV are part of a spread. An investor sold the May 36 – 38 put spread at 76 cents, 25000X, and might be closing or adjusting an existing position. May 36 and 38 puts are the most actives. May 35, May 40, Jun 35 and June 39 puts are heavily traded as well.

 Oil prices sliced through the 110 level and the decline is pushing oil producers lower. The larger than expected build in US Department of Energy crude oil inventory, assisted in the slide of petroleum products.

Murphy Oil (MUR) is down 2.7 percent to $72.64 and May 70 puts saw interest ahead of earnings. 4,680 traded (82 percent Ask) vs. 2,330 in open interest. Shares of the oil explorer are on a three-day 6.2 percent skid ahead of the results.

There were stocks in the S&P 500 that did see up volume despite the downward pressure on equities. Macy’s (M) crept higher and the Jun 23 – 27 strangle is sold at 79 cents, 8150X. More than 10000 traded and appears to be opening activity. Several blocks of Macy’s shares, totaling more than 500K, have also traded today. The retailer reported earnings on February 22 and has been trading in a range since that time.

The VIX ran into resistance ahead of the 50-day moving average near the 18 level.  The spike up in volatility has taken the benchmark volatility indicator up 4 points from the lows below 15 late last week.

US equity markets consolidated and closed slightly lower on a historic day for the US as Osama Bin Laden was reported killed and then buried at sea. Initially the market reaction was positive, but investors soon moved on to thinking about future economic data released in the US.

The US ISM’s PMI manufacturing index slipped to 60.4 in April from 61.2 in March. Economists surveyed had expected the April PMI to fall to 59.5. The ISM sub indexes were mixed. The new-orders index fell to 61.7 last month from 63.3 in March, while the production index dropped to 63.8 from 69.0. The factory-employment index edged lower to 62.7 from 63.0. The inventory index increased to 53.6 from 47.4, and the prices index edged up to 85.5 in April from 85.0 in March.

U.S. construction spending rose in March. Construction spending increased 1.4% to a seasonally adjusted annual rate of $768.90 billion compared with the prior month, according to the Commerce Department. Spending in February fell 2.4%, revised down from minus 1.4%. Outlays also fell in January and December. Construction spending is down 6.7% from March 2010. Economists surveyed expected March construction spending would rise by 0.4%.

Interest in SPDR Industrials (XLI) June 40 calls continues. 59,308 traded (91 percent ask) and appears to add to positions opened last week. Open interest increased by 98,303 following Friday’s action. At 208,370 the June 40 call is now easily the biggest position in the name.

The risk-positive mix of a continued US expansion and an accommodative Fed stance is bearish for the greenback via global risk sentiment, low volatilities and US yield differentials, but there is more than this on the drivers front. In the short-term much depends on how the markets defend key psychological levels of 1.10 for the Aussie and 1.48 for the euro.  The Powershares Bullish Dollar Fund (UUP) is down .2 percent to $20.91 and touching new 52-week lows. In options action, June 21 puts are seeing interest for a third day. A block of 25,000 traded at 34 cents when the market was 34 to 37 cents. Another 25000 traded at 35 cents. Open interest in the contract declined by 42,692 to 113,574 after Friday’s action.

The VIX surged 1.33 points to settle above 16 for the first time in the past 7 trading sessions.  The nearly 9% surge is likely to be met by resistance near the 20-day moving average which comes in slightly above 16.  Overall options activity was average on the S&P 500 index which traded near 550k contracts.  This week volatility could remain relatively high as investors need to absorb three employment figures.  The data released include the ADP private employment on Wednesday, the Jobless Claims on Thursday, and Non-farm payrolls on Friday.