Futures point to quiet open, but this could change following data on consumer prices and housing starts. Talk about TARP and how it should be used continues to be the hot topic. Volatility could continue to be common not only due to uncertainties in the economy, but also because of option expiration on Friday. In overseas trading, European stocks are down more than one percent in midday trading with financials the leading decliners.

The major market indices continue to show a lot of volatility, but the bears have definitely been in charge. On Tuesday, stocks got strength at the end of the session to see gains. The lows that were tested last week continue to hold, something the bulls hope will continue. However, with the auto sector in dire straits and housing still showing few signs of improvement, traders have reasons to be concerned.

On Tuesday, Fed Chairman Bernanke, Treasury Secretary Paulson and FDIC Chairman Bair spoke before the House Financial Services Committee. Today, this group will continue to ask questions of these leaders about TARP. One thing that seems apparent now is that a new stimulus package will not be implemented this week. Secretary Paulson stated yesterday that he also would like to leave the remaining $350 billion in TARP for the new administration.

The housing sector got bad news Tuesday when the housing market index fell sharply to another record low. This shows how bad the outlook is for those in the sector. This morning, weekly data on mortgage applications fell 12 percent to 248.5. Traders will get more information on the sector later this morning when housing starts are announced. Estimates are for a reading of 0.780 million, down from 0.817 million units in September.

The automakers will continue to be a focus today with the Big Three begging for help. Analysts feel that General Motors (GM) might not make it through the end of the year without some sort of bailout. Leaders of the Big Three, which includes Ford (F) and privately-held Chrysler, are set to plead their case before government leaders later today.

In earnings news, retailer BJ’s Wholesale Club (BJ) provided positive results. Not only did the company best earnings estimates by 2-cents a share, but they also raised their guidance for the full year by 10-cents a share. This could be another situation where consumers are looking for better deals, much like the strength seen in Wal-Mart (WMT).

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site