Some Dollar relief and foreign aid from Asia Development Bank find stateside bulls buying the pullback. As of 10:45 ET the SP-500 (SPY) is up 0.35% after a minor setback for the truly fearful investor.
Following two sessions of furrowed and sweaty brows wondering "Is this it?" it turns out it was for fearful bulls sensing the need to buy the dip. In the driver's seat for many of Tuesday's roaming optimists, the US Dollar (UUP) is lower by about 1% and retesting its year-to-date lows.
In turn and helped along by notice the Asia Development Bank sees stronger growth for Asia, dollar-denominated and green shoots inspired commodities, are once more, free to find a bid off the "Monbacky!" Intraday and spearheading the technical drive by bulls, the Market Vectors Steel ETF (SLX) and US Oil Fund (USO) are up 2.25% to 2.60% respectively.
Aiding and abetting, an upgrade to "Neutral" and target lift to $55 on US Steel (X) from BofA is helping steel stocks flex their muscle with its 3.50% gain to 39.50.
In gadget-land, Palm (PALM) is delivering high-fives for bulls in Tuesday's first half. Following Friday's cautious reaction to a mixed-to-disappointing earnings report, shares are continuing to mount a short-covering charge into higher ground. Monday saw shares surge nearly 14% fueled by PALM's 30% short interest and despite buzz of a secondary offering or because of it-depending on how one enjoys their bull served.
Tuesday's extension rally of nearly 5% in PALM comes courtesy of rumors Nokia may have an interest in the company and official word the secondary would be priced today. On the option front, some bulls buying the story are busy as call volume trumps put activity by a 2-to1 margin with overall heavy action of 35,000 contracts. Not that call buyers can be blamed entirely. A very strong and favorable skew in the calls in excess of 25 to 40 volatility points versus the puts is priced into the PALM options.
"The allowance" or margin of error is due to investors likely inability to short or the very real possibility of being called in on any short sales to offset the bullish call delta. The uncertainty surrounding short stock leads to the non-directional conversion consisting of long stock, short calls and long puts as the net overall position of choice.
In turn, the order flow which wants to hold long stock in inventory to alleviate risk but not necessarily the delta, is what forces the skew out of whack. Net, net the long call delta is cheap and the short put expensive for bulls. For hedging, call calendars become inherently more risky and the vertical would be the preferred softer delta strategy due to its construction and ability to exercise the long contract and maintain profitability if necessitated.
Elsewhere, bulls and shorts are also having a second go at it in shares of AIG (AIG). A similar technical tale, as well as short stock and option situation can be spied in the insurance goliath. Goading the upside of about 6.50% to a potential double top situation is word this morning from the WSJ. Apparently, the company is showing signs of stabilization, however it's still "too early to tell whether the company can repay taxpayers and restructure its businesses" according to a government watchdog and per Briefing.com.
And finally, entering into the lunchtime hour and with the market prodding and poking its way a bit higher by 0.45%, more than a few bulls must be rankled by NASDAQ leaders and PALM's dominant niche peers, Apple's (AAPL) and RIM's (RIMM) refusal to go higher today. Personally, the observation is both names are likely due a rest that's longer than the current worry lines of three to four sessions can muster up. Speaking of which, the bare bones corrective scratch of 2.20% over two sessions in Mr. Market (SPY) looks equally at risk of seeing a different type of fear nearly forgotten, from investors in the days ahead.
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.
