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More out-the-gate financial headaches and the latest  not-so-great economic data have the bulls on the defensive. As of 10:45 ET the “Cubes” (QQQQ) and “SPYder” (SPY) are off 0.70% to 0.98% on heavier levels of investor conviction.

Tuesday’s early tone has found Wall & Main downfield of where they left off Monday evening. Further dredging efforts by America’s Anchor Bankers (XLF) are one sore spot and / or point of concern for many investors. The latest surprise in a never-ending series of bad reports has Lehman (LEH) facing an additional $4.0B in writedowns for its third quarter according to JP Morgan. Shares are off 1.50 at 13.50 as traders thus far fail to optimistically embrace any potential lights at the end of the tunnel.

At the same time, a dire forecast made by the IMF’s former chief economist that “a large US bank will fail in the next few months” has helped fuel prices lower and the concern-o-meter to relative highs. Speaking before a financial conference, Mr. Rogoff went on to stress that the credit crisis is only near its halfway point and that in his estimation, “the worst is yet to come.”

Separately, a couple names from this week’s heavy crop of retail reports are finding slightly pressured action on mixed results. Target (TGT) is off 1% near 49.55 after beating by six cents with profits of $0.82 per share but showing slightly weak sales. Separately, Dow component Home Depot (HD) is off 1.55% following its dime beat of $0.71 per share and reaffirming prior but weak guidance which calls for a 24% drop in profits for FY08.

And finally, shares of Staples (SPLS) are off 5.70% after the company warned for its Q2 period citing challenging market conditions. The office supplies giant expects earnings to drop 15% from the year ago period when it reports early next month.

Officially-sanctioned economic news saw traders furthering existing pre-market efforts at profit-taking. A second, but more prepped and less-important inflation data courtesy of the PPI has nonetheless been a thorn for market bulls. Monthly prices at the wholesale level came in well-above forecasts of 0.6% with a reading of 1.2%.

Axing the little things in life and traders were equally disappointed as a 0.7% increase more than tripled estimates of 0.2%. With year-over-year readings jumping by 9.8%, additional headline ammo along the lines of “27 Year Highs” and a time when Journey’s “Don’t Stop Believing” was a hit; has aided in Tuesday’s early price schnitzel efforts and obviously enflamed concerns over the economy.

Separately, housing data on starts and building permits came in mixed, but overall disappointing based on trader reaction. Starts narrowly beat views by 2K while falling 11% to an annualized rate of 965K. Permits though, used as a measure of future activity, fell by 17.7% to 937K and below consensus forecasts of 949K.

In related markets, Black Gold (USO) and the Yellow Metal (GLD) are relatively quiet with each off 0.15% intraday. An equally hushed US Dollar (UUP), TS Fay missing Gulf oil facilities and trader talk of a hedge fund bankruptcy at SageCrest Finance and those collective investor types no longer in a position to drive markets speculatively north are amongst a couple of Tuesday’s top findings still being deliberated and always subject to trader revision.

In the options market, one trader appears to be betting a bit more cautiously on the likelihood of Marvell Tech (MRVL) moving higher. Back on Aug 7, shares of MRVL caught a taste of “takeover chowder” with Texas Instruments (TXN) being the rumored suitor and accompanied by a convinced population of OTM call buyers that sent the put / call ratio down to a lowly 0.11. In Tuesday’s first half, trading activity is less heavy but impressively skewed towards the put side. Intraday more than 13,000 puts running across the board through November and distributed between the 15 and 17.50 strikes are outpacing calls by a margin in excess of 6-to-1.

However, with implieds actually showing a slight slip from last night’s closing levels, rather than seeing the unusual contract volume as bearish bets being wagered, premium sellers appear to be driving the action. Bull put spreads, short calendars, ratioed synthetic straddles and of course naked premium sellers hoping not to encounter any real bears are all potential suspects with smaller and more difficult-to-determine prints behind the action.

And finally, “That didn’t take too long.” Half way through the lunchtime hour and before sending the bits and bytes into cyberspace, oil (+2.55%) and gold (1.55%) bulls are gearing up for “Bargain-hunting” headlines. Purportedly, a weaker US Greenback (UUP) that’s registering a decliner of .10 to 23.76 is behind the magic. Equity bulls on the other hand have yet to embrace the move. However, with influential sectors like the energy (OIH, XLE) and commodity complex (GDX, XLB) finding their technical mojo as well; unlikely, but somewhat truthful headlines of “Wall Street Cheers Higher Oil” could find themselves in the mix.

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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