Stocks Post Modest Recovery, While the VIX Takes a Plunge

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"We bounced today after yesterday's huge sell-off, but to say we're out of the woods is anything but true," reported Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. The Dow Jones Industrial Average (DJI) made modest headway today and held above breakeven for most of the session. "Later this week, we'll hear an interest-rate decision from the European Central Bank, and the monthly jobs data from January is due here at home. So the recent volatility could be here to stay for the next few days."

Continue reading for more on today's market, including :

Trading Topic of the Week -- Reasons to Dodge Directional Risk: Lower the risk of a 100% loss . When you're playing straddles, at least one of your options will typically expire with some intrinsic value remaining.

The Dow Jones Industrial Average (DJI - 15,445.24) recovered some of yesterday's losses, adding 72.4 points, or 0.5%, by the close. Two pharmaceutical heavyweights -- Merck & Co, Inc. ( MRK ) and Pfizer Inc. ( PFE ) -- led the 19 Dow advancers, each posting a 2.8% gain. The 11 laggards were paced by United Technologies Corporation's ( UTX ) 1% loss.

The S&P 500 Index (SPX - 1,755.20) also fought back, jumping 13.3 points, or 0.8%. Elsewhere, the Nasdaq Composite (COMP - 4,031.52) eased back above the 4,000 level to settle with a gain of 34.6 points, or 0.9%.


The CBOE Volatility Index (VIX - 19.11) collapsed after Monday's spike higher, shedding 2.3 points, or 10.9%, and putting in an intraday low of 18.44.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"Recent action in the VIX has been very interesting," Detrick noted. "As we know, spikes in the VIX can mark market bottoms -- they can show a good deal of fear, as option players are willing to pay up for the price of protection. Yesterday, the VIX spiked past 21, before selling off today and closing beneath the 20 mark. This is significant because the past few VIX spikes all went up to about 21, then sold off hard. Today is just one day, but if you were looking for a bullish point to help you sleep tonight, that is it."

5 Items on Our Radar Today :

  1. Factory orders dipped 1.5% in December, primarily due to shifts in the volatile transportation sector. This was slightly better than the drop economists were expecting. Excluding transportation, new orders ticked 0.2% higher . (Reuters)
  2. Change is in the air at Microsoft Corporation ( MSFT ), which appointed Satya Nadella as its new CEO , effective immediately. Also, company founder Bill Gates will relinquish his role as board chairman, but will remain a board member, as will outgoing CEO Steve Ballmer. (CNNMoney)
  3. A move higher in Apple Inc. ( AAPL ) shares spurred speculation among short-term call buyers.
  4. Skepticism is rather heavy toward Twitter Inc (TWTR) , as the company prepares for its first earnings report.
  5. Oracle Corporation (ORCL) earned a tepid mention on the Street this morning.

EARNINGS

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Oil futures gained ground in anticipation of tomorrow's weekly inventory report. Oil for March delivery rose 76 cents, or 0.8%, to close at $97.19 per barrel.

Gold futures moved lower as stocks regained a modest portion of Monday's losses and the dollar gained ground. By the closing bell, April-dated gold was off $8.70, or 0.7%, at $1,251.20 an ounce.

SCHAEFFER'S MARKET POSTURE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: MSFT , AAPL , MRK , PFE , UTX

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