EARLY TRADE

What a difference a week can make. From recent tried and tired Merger Monday headlines, early conditions have been replaced by volatile Manic Monday behavior. As of 10:30 ET, the S&P500 ($SPX) and NASDAQ Composite ($COMPQ) are off fractionally by -.10% to -.15% on above average levels of bears and bulls.

Yet another bottom is in as investors move past the first hour of some highly volatile trade. Whether the fresh lows in the major averages "stick" is far from certain, but amidst a deluge of more negative news and sentiment, deeply oversold conditions have been greeted by value-based technicians and their balance sheet cousins.

Topping off Monday's brew of negative catalysts, further declines in overseas markets and increased risk aversion set the early tone for a retest of last week's technical lows. The Yen (FXY) rose to three-month highs versus the US Greenback as the now familiar foreign exchange carry trade continues to be unwound by hedgies and other Wall Street rocket scientists. In corporate news, the good, the bad and the ugly net-net didn't help matters either, as the latter adjectives have clearly outflanked the former bullish cause for investor cheer. Not so good, Research In Motion (RIMM) is the latest tech issue, after a quiet period of sorts, to restate accounting results. After an options review, the company assessed that it will need to take a charge of $250 million for prior reporting periods. Intraday, RIMM is off 60 cents at 135.37, but well-removed from scandalous lows of 131.19.

Fellow handheld device maker Palm (PALM) is also getting slapped by investors this morning. After increasing buzz of possible suitors like Nokia (NOK) being interested in the company and a price move showing a defiant bit of investor appreciation, PALM is sinking on not-so-kind headlines and whispers. The company did announce that Morgan Stanley will help management look at strategic alternatives, but an analyst cut to "underweight" from "neutral" and chatter elsewhere confirming the move, has the stock lower by -1.15 at 17.15. Elsewhere, the recent attempt at leadership by the semiconductors (SMH) is seeing further difficulties Monday morning. Advanced Micro (AMD) warned that it may not meet its prior revenue guidance for the first-quarter and fellow chip stock Marvell (MRVL) was downgraded to "neutral."

Even more ugly for some traders, sub and prime lenders (MTG, CFC, NFI, JPM, BAC) continue to get hit with negative catalysts. In Monday's session, the already embroiled New Century Finance (NEW) is under severe pressure after gapping lower by more than 50% and making its impact on other related names in the group. Late Friday the company announced it's facing a criminal probe. With NEW off nearly -8.50 points at 6.20, the stock has lost 80% of its value in the last four weeks. On the positive side, while the increase in mortgage delinquencies is a concern for that market, consumer credit and applications remain healthy according to analysts and doesn't point to evidence of a deteriorating economy. And finally, it's not all sour news for investors this morning. Computer peripheral giant Apple (AAPL) tastes sweet for more than a few shareholders. AAPL is tacking on 1.50 to 86.90 after receiving an upgrade to "overweight" and a ‘buy on weakness' declaration by Prudential.

Elsewhere, while the broader indices have snapped back on bargain-hunting efforts, hard commodities and Black Gold are moving to the downside. For precious and industrial metal bugs, today's drop [IAU off -.55%], [SLV off -2.05%] is a continuation move as exacerbated fears over weakness in Asian economies motors on. For April crude futures, the move looks to be a delayed response to the same theme after quietly riding out the storm last week. Intraday, the contract is off -1.79 at $59.85 or nearly -3%, as its first $60 test in seven sessions puts in pole position for relative weakness.

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INDICES & MARKET MOOD

Oversold became a bit more so this morning, but for viewers of CNBC it's all about the bull always in play. Today marks the start of the financial network's infamous $1 Million Stock Challenge. Apparently though, one of the rules aside from not being able to make good use of limited risk strategies, are players can't short stocks. I guess that means that they're only interested in a CNBC poster boy that's lucky and nearsighted. Hmm, I guess we could always buy something like the ProShares UltraShort QQQ (QID) or the ProShares Short MidCap400 (MYY).

Elsewhere, the latest potential bottom is in as we head further into the lunchtime hour. There are plenty of technicals such as Fibonacci, price congestion, MA's and short-term extremes to monitor for that event to be something other than an intraday affair. The latest ode to the oversold prognostications is the CBOE Volatility Index ($VIX) hitting slightly through the 20% level out-the-gate. It's not exactly the 30%, which used to be associated with actual fear in the marketplace. However, keeping eyes peeled for a FTD later this week or investigating limited risk strategies not predicated on the Delta factor alone, makes good sense and maybe ‘cents' as well. 

Chris Tyler
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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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.

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