More bearish “tales and tails” in the financials and reignited crude realties are making for another volatile session in Thursday’s first half. As of 10:50 ET the “SPYder” (SPY) and “Cubes” (QQQQ) are off .48% to 1.30% but removed from the “Opening Hell” anxieties.
After a brief rendezvous with the unchanged marker, market bulls have been caught schnitzeling their intraday bargain-hunting efforts. Spearheading the session’s “woe is me” antics are a one-two punch in the financials (XLF) and surging commodity prices sans a matching show of affection in related service and production stocks.
In America’s Anchor Bankers, it’s really a case of the story being the “same as it ever was” and a well-played one this morning by our favorite business network talking heads. Continued worries of GSEs Freddie (FRE) and Fannie’s (FNM) needing a Treasury-backed bailout, while management at the two companies continue to maintain their silence, resulted in further out-the-gate frustrations and panic by investors. Intraday, shares of FRE and FNM are flickering with prices levels associated with bullish courage, bargain-hunting and the likes after early tumbles in excess of 20% during the camera-ready “Opening Hell” sequence.
Citigroup isn’t helping matters either. The banker has followed in Goldie’s footsteps in near identical fashion with downgrades / reductions of America’s Anchor Bankers (GS, LEH, MS). Of the group and “still” taking it the hardest on-the-chin, shares of Lehman (LEH) are off 6.0% at 12.85, which incidentally received the largest anticipated writedown with a figure estimated at $2.9B.
A jump in crude oil and most commodities has also by and large been a source of bearish worry for equity investors. Behind the move in the likes of the US Oil Fund (USO), furrowed eyebrows are citing elevated and fresh US / Russia tensions related to Washington’s “missile shield deal” with Poland. The agreement has angered the Russkies and prompted a weaker US Dollar (UUP).
Also helping promote a bid in Black Gold, TS Faye concerns are still being bandied about, existing geopolitical hotspots such as Iran, technical bargain-hunting, as well as contract strength following Wednesday’s rally off a purportedly bearish inventories report. With the USO up 4.20 at 98.17, crude futures are having a similar dandy day bullying the bears and tacking on 6 points near $121.50 a barrel and now just $27.50 south of Goldie’s reiterated end of year for forecast.
On the options side, the DB Agriculture ETF (DBA) which is tied to soft commodities such as soybeans, wheat and the likes, has seen some aggressive midmorning buy side action. Shares are currently up 1.25 at 37.56. Led by a couple institutional-size prints, buyers have established long call positions in the OTM September 40’s. Implieds have pressed higher to one month highs due to offer-side purchases on mixed theoretical pricing.
The Sept 40 calls opened from $0.70 - $0.75 as the underlying surged 2.5% intraday. With an attached 30 delta, what isn’t known is whether the transactions effected were delta neutral with stock as part of the package. That trade i.e. synthetic straddle would stand to profit from a large move in either direction versus a position in need of further upside movement and ultimately; one established for a slightly aggressive price.
And finally, what do bulls want? It changes with daily shifts in investor psychology of course, but one thing which would certainly help would be a similar size gain in those important commodity-related “picks and shovels” stocks (OIH, XLB, SLX, GDX, XLE). Thus far however, while there is a sympathy bid in those groups, the pin action is mostly trailing. Until that changes, vocalized harping over the price of gas and the likes will be the order of the day.
Chris Tyler
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.
