Cusick's Corner

With both earnings continuing to disappoint and talk of Helicopter Ben on the outs, the market is in a negative mood. While the reports of Bernanke potentially moving on in the near future are not formal, they have put gold traders and interest rate handicappers in a bit of a tizzy this morning. This also has led to some bullish trade in the Dollar, UUP, which continues to pressure the Crude markets, -2.81%. Mid-term support, 50-Day Moving Average, has been broken in the major indices and now longer term trends might come under pressure, most notably the 200-Day Moving Average is being challenge in the Tech sector, QQQ. Watch 1400 on the S&Ps, if broken this could trigger a deeper pullback. See you After Hours.

Market Recap

Stocks are trading lower on concerns about corporate earnings and on a downgrade of Spain. Market averages finished with losses across the Eurozone, including 2 percent declines in Germany's DAX and France's CAC 40 Index, after Moody's downgraded five Spanish regions. The news put the debt crisis back into focus and the euro is down .65 percent to 1.2967 against the dollar. In the US, much of the focus is also on earnings. DuPont (DD) sank 8.8 percent and is the biggest loser in the Dow Jones Industrial Average on the heels of its results. 3M (MMM) and United Technologies (UTX) are also trading lower on earnings and weighing on the Dow heading into midday action. The economic calendar remains light and the Federal Reserve begins a two-day meeting today. A post-meeting announcement is due tomorrow afternoon. Concerns about the global economy might prompt an expanded QE program, but it's not clear whether or not officials will signal additional easing at the end of the meeting Wednesday. Weakness across some of the commodities also seems to reflect concerns about the economic backdrop, as crude oil lost $2.41 to $86.24 and gold gave up $17.5 to $1708.8. Meanwhile, the Dow Jones Industrial Average is down 230 points and the NASDAQ dropped 26. CBOE Volatility Index (.VIX) is up 2.38 to 19. Trading in the options market is very active and reflects the negative underlying tone, with 3.7 million calls and 4.1 million puts traded across the exchanges through 11:30am ET.

This Morning's Bullish Trading

Yahoo (YHOO) is a bright spot today. Shares of the Internet giant are up 91 cents to $16.68 after the company reported earnings that topped expectations. Yahoo earned 35 cents per share for the quarter, which was 9 cents better than Street estimates. Revenues also exceeded expectations. The stock is at 11-month highs on heavy volume of more than 50 million shares. Meanwhile, 200,000 options traded on YHOO, including 121,000 calls and 78,000 puts, which is 2.5X the daily average. November 16 puts are the most actives and are possibly seeing some liquidating trades, as the contract is falling 68 cents out-of-the-money and has 36,463 in open interest. November 17 and January 17.5 upside calls are the next most actives in YHOO today.

Petrobras (PBR), the Brazilian energy giant, is down 78 cents to $22.07 and options volume on the stock is 2X the daily average. About 22,000 calls and 4,140 puts traded on PBR, a ratio of more than five-to-one. The top trade is a 15,780-contract block of December 23 calls traded for 62 cents per contract when the market was 60 to 62 cents. 17,250 contracts now traded against 939 in open interest. The stock is down $23.26, or 5.1 percent, during the past month. The interest in Dec 23 calls might reflect expectations for a move higher through mid-December. It might be a play on earnings. The company last reported in early-August.

This Morning's Bearish Trading

US Steel (X) is down $1.05 to $21.86 and options on the steelmaker are busy today. 13,000 calls and 13,000 puts so far. One of the top trades surfaced just after the opening bell when the stock was still trading near $22.35. A block of 2,200 November 23 puts traded on US Steel for $1.61 per contract on the International Securities Exchange. Data from the ISE is reporting an opening buyer. 3,540 now traded. January 22.5 calls are the most actives. 7,350 traded and nearly all of the volume (97 percent) has been on the bid, suggesting call writing or selling. Open interest is 11,170 and so the flow is possibly liquidating activity. The increased activity in US Steel comes ahead of the company's October 30 earnings report.

Meritor (MTOR) is off 15 cents to $4.49 and some investors are showing interest in February 5 puts on the Troy, MI auto parts company today. One of the top trades is a 1664-lot for $1 when the market was 90 to 95 cents. Another 2500-contract block traded for 95 cents. Total volume is now 5,270 against just 71 contracts in open interest. Positions are being opened just one day after the stock rose 5.5 percent on an analyst upgrade and ahead of a Nov 14 earnings report.

Volume Signals

Yahoo (YHOO) options volume is running 2X the (22-day) average, with 185,000 contracts traded and call volume accounting for 60 percent of the volume.

Alexa Pharmaceuticals (ALXA) options volume is 32X, the average daily, with 52,000 contracts traded and call volume representing for 99 percent of the activity.

DuPont (DD) options volume is running 6X the average daily, with 46,000 contracts traded and put volume accounting for 67 percent of the activity.

Increasing options activity is also being seen in UPS, Coach (COH), and Monster Beverage (MNST).

Implied Volatility Mover

Implied volatility in the options on Exxon Mobile (XOM) is moving higher Tuesday. Shares of the energy giant are down $2 to $90.19 in active trading of 6 million shares and among 28 Dow stocks moving lower after crude oil prices slipped another $2.49 to $86.18 per barrel. Trading in the options on Exxon is busy as well. 28,000 calls and 30,000 puts so far. April 100 calls are the most actives. 4,940 traded. November 90 puts and calls are busy as well. Meanwhile, implied volatility in XOM options is moving up 18 percent to 17 heading into the company's November 1 earnings report.

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