A couple influential upgrades on an otherwise ultra-light news session have bulls back to business as usual. As of 11:05 ET the S&P500 (SPY) is up 0.50% and making its way towards a bubble, umm double top test of intermediate highs.
A lack of sweet deals to savor (CBY), nor energetic converts by wannabee bulls (ENER) or no further proverbial "thumbs up" calls from the likes of the IMF hasn't stopped investors from nibbling ever higher in Wednesday's non-humper market action.
Largely, the idea of never selling a dull market comes to mind to this strategist. That being said, surveyors of the headlines sifting for actionable ideas have an analyst move or two to thank in keeping the bull looking secure. Citigroup raised credit card issuers Mastercard (MA) and Capital One (COF) from "Sell" to "Hold" and "Hold" to "Buy" while boosting price targets to $209 and $44 respectively. With shares of MA up 3.50 near 211, shouldn't the call have been "Buy to Cover" and let's rethink our options?
On other sometimes intertwined fronts, Black Gold (USO) is tacking on an additional 1.00% to 37.33. Tuesday saw shares up 5.15% on reinvigorated green shoots efforts and a demand dream, umm theme helped along by a precipitous slide in the Greenback (UUP). Wednesday's gain may also have OPEC to thank.
Ministers are expected to maintain production levels later today. The widely-expected announcement stands to benefit oil and gas service companies, while also providing relief for investors who might otherwise be concerned that OPEC sees waning global demand.
In passing and potentially of interest later this afternoon, results from a $20B treasury action will be announced at 1:00 ET. In front of the release, the iShares 20-Year (TLT) is off 0.66% at 93.92 and following through on Tuesday's optimistic downward path-for bond bears and hopeful equity bulls, that is. Separately, Fed's Beige Book which provides anecdotal economic evidence across the US will be released at 2:00 ET.
On the option front and with commodities being a beneficiary of traders' collective and decidedly more optimistic outlook on global economies, one name seeing very unusual action is Arch Coal (ACI). A spied freebie initially found on OptionMonster has seen very aggressive call buying while shares put together a very quiet decliner of 0.10 near 18 and within a six week lateral base.
Most active, the near 100% out-of-money but time on their hands, January 2011 35 calls have seen more than 8,500 contracts trade. Currently, the soft sub 20 delta option is priced at $0.85 mid market on a theoretical long-term discount of about 30% with implieds just south of 50%. Also noteworthy, a bit more than 5,300 of the January 2011 30 calls traded, along with nearly 2,000 closer in, relatively speaking, April 22 calls.
According to the OptionMonster's proprietary Heat Seeker, the activity appears to be the work of buyers. If so and as mentioned, a theoretical edge looks to exist, if those same buyers have also hedged those bets with short stock. In saying that though, I have my doubts about synthetic straddles placed on strikes adjacent to one another and that far out, as the January activity is. I also have my doubts that these are three straight up opening buy orders, despite what the coal-fueled automatons might be telling us the action is all about.
Chris Tyler
Senior Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
