U.S. stock futures are rallying this morning as buyers swarm following yesterday's breakout. The S&P 500 finally felled overhead resistance at 2,820 clearing the way for an eventual retest of last September's 2,940.91 peak.
The Federal Reserve begins its two-day meeting today and is widely expected to keep interest rates at current levels. As usual, traders await tomorrow's statement to discover if Jerome Powell and crew maintain their tone on the future direction of monetary policy.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.35% and S&P 500 futures are higher by 0.33%. Nasdaq-100 futures have added 0.38%.
With the fresh market breakout, fear officially left the building. As such, put volume fell off a cliff while call volume remained normal. Specifically, about 17.7 million calls and 12.9 million puts changed hands on the session.
The large disparity between the two drove the CBOE single-session equity put/call volume ratio down to 0.52, which is just shy of its low point for 2019. Meanwhile, the 10-day moving average finally succumbed to gravity and fell back to 0.64.
Let's take a closer look:
Disney share slipped 1.6% on Monday amid heavy volume. The weakness came while the rest of the market pushed well into the green and could be due to the company finalizing details of the share distribution connected to their purchase of many assets from Twenty-First Century Fox (NASDAQ: FOXA ).
From a price perspective, the slip did little to change the overall trend for DIS stock, so this could be much ado about nothing. Nonetheless, it did gin up some excitement in Disney options. Before getting to that, it's worth mentioning the recent trend for DIS has been uninspiring. The last six months have seen little traction from bulls or bears leaving us with a sloppy trading range. There are far better trending stocks to trade in this market.
On the options trading front, calls won the day by a wide margin. Total activity grew to 230% of the average daily volume, with 120,825 total contracts traded. Calls accounted for 70% of the tally.
Implied volatility slid lower on the day to 24%, which places it at the 38th percentile of its one-year range. Premiums are now baking in daily moves of $1.72, or 1.5%.
Facebook fell for the third day in a row, with heavy volume to boot. Its relative weakness stands in stark contrast to a tech sector, which has been pulling the broader market higher. This inability to participate in the upside thrust of the Nasdaq should be worrying FB stock owners and giving would-be buyers pause. There are far stronger candidates in the tech sector right now.
FB stock is testing key gap support and the 50-day moving average at $159.50. If this level gives way, then a gap fill which could take it down to $150 is in the cards.
On the options trading front, calls outpaced puts despite the day's drubbing. Activity swelled to 190% of the average daily volume, with 441,110 total contracts traded. 59% of the trading came from call options alone.
The descent in FB is drumming up demand for options and has pushed implied volatility up to 28%. That places it at the 34th percentile of its one-year range and means options are now pricing in daily moves of $2.86, or 1.8%.
The inevitable awakening in AMZN stock has begun. Monday's breakout has been a long time coming, and it has the potential to kick-start a strong upside run. For months Amazon has been locked in an uncharacteristically narrow range that was bound to give way to a volatility surge.
Yesterday, Amazon finally poked its head through overhead resistance and the 200-day moving average. The higher volume of the past two trading sessions is also adding validity to the breakout attempt.
Not surprisingly, traders are taking to the options market to participate in the bullish festivities. Calls reigned supreme, accounting for 62% of the total. Activity ramped to 116% of the average daily volume with 186,551 total contracts traded.
The increased demand drove implied volatility higher on the day to 25% placing it at the 31st percentile of its one-year range. Premium sellers will be happy to note this is the highest level since late-July.
Meanwhile, implied volatility is finally beginning to ascend from the cellar by climbing to 24%, or the 25th percentile of its one-year range. Premiums are now pricing in daily moves of $26.10, or 1.5%.
As of this writing, Tyler Craig didn't hold a position in any of the aforementioned securities. Check out his recently releasedBear Market Survival Guideto learn how to defend your portfolio against market volatility.
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