Europe stock market forecast week september 12 2011 : EU in flux, the Euro currency collapses, plus fear of terrorist attacks into the Anniversary of 9/11 — but the market held the levels that I spoke of in the Midday, which gives me a sense that next week the volatility/market will potentially normalize, and barring any incident over the weekend, we could set up for a retest of this week’s highs. Next week will be very interesting, volatile, and full of opportunity so get ready. See you Monday.
Stock market averages opened lower and never recovered Friday. The focus in on Europe; where equity markets and the euro are reeling amid ongoing concerns about the debt crisis. Spain’s IBEX lost 3.8 percent, Germany’s DAX gave up 3.6 percent and France’s CAC 40 Index slid 3.2 percent Friday on talk Greece is near default. An unnamed Greek official was out denying the speculation today, but the euro plummeted to multi-year lows against the yen and, after steep losses Thursday, is down another 1.6 percent against the buck today. News that top ECB economist Juergen Stark unexpectedly resigned also weighed on European markets. In the US, the economic calendar held just one report on Wholesale Inventories, which was up .8 percent in July and seemed to have no market impact. Instead, the focus is on Europe and players are selling shares into the weekend. With ten minutes left to trade, the Dow Jones Industrial Average is down 285 points and the tech-heavy NASDAQ lost 57.
Bullish
An interesting spread trades in Toyota Motors (NYSE:TM) today. Shares of the Japanese automaker are falling to new 52-week lows and were recently down $1.49 to $67.88. Meanwhile, a three-way options play was initiated in Toyota Friday morning. In this strategy, the investor apparently sold 2,500 September 72.5 calls on the automaker at 13 cents per contract. They also bought 2,500 October 70 calls at $1.90 and sold 2,500 October 75 calls at 49 cents. The spread looks like rolling activity. That is, the investor is selling-to-close a position in out-of-the-money September calls before they expire at the end of next week, while opening a new bullish position in the October 70 – 75 call spread for a $1.41 net debit. They probably had a positive view on the stock through September, but are now buying one more month of time for the bullish trade to play out. However, instead of holding straight calls, they’re initiating a spread strategy instead.
Bullish trading was also seen in Monster Worldwide (MWW), Abercrombie (NYSE:ACF), and Sony (NYSE:SNE).
Bearish
Bearish traders were active in JC Penney (NYSE:JCP) today. The stock has not escaped the sell-off and is down 63 cents to $25.44. Options volume in JCP includes 10,000 calls and 15,000 puts. Average daily volume in the retailer is about 10,000 (puts and calls). The top trades are part of a spread, in which 3500 October 24 puts were apparently bought at $1.35 and 3500 October 21 puts sold at 56 cents. In other words, an Oct 21 – 24 put spread was bought for a 79-cent net debit. The spread has traded multiple times today and volume in both contracts is more than 6,200. It’s bearish play with a max potential pay-off if shares fall to $21 through the October expiration, which represents a 17.5 percent decline over the next 42 days. A shareholder might have initiated the spread to help hedge JCP stock.
Bearish trading was also seen in Barclay’s (NYSE:BCS), XL Capital (NYSE:XL), and Isis Pharmaceuticals (NASDAQ:ISIS)
Index Trading
CBOE Volatility Index (.VIX) surged amid increasing activity in the index market Friday. 772,000 calls and 1.23 million puts have traded on the S&P 500 Index (.SPX), the S&P 100 Index (.OEX), and other cash indexes today, which compares to 591,000 calls and 727,000 puts traded Thursday. CBOE Volatility Index (.VIX), which tracks the expected volatility priced into SPX options, hit a high of 40.74 and was recently up 5.14 points to 39.46. The jump in the market’s “fear gauge” reflects the negative or bearish sentiment that has resurfaced in September. The S&P 500 Index is down 5.3 percent during the first six trading days of the month and CBOE Volatility Index has rallied 26.4 percent during that time. Fear is back.
ETF Action
CurrencyShares Euro Trust (FXE) saw another day of brisk trading. As noted in yesterday’s wrap, 14,000 calls and 80,000 puts traded on the ETF Thursday. Today, shares lost another $2.25 to $136.09 on a rough day for the European currency. The fund is designed to track the price action of the EUR/USD currency pair (X100) and has now given up 18.8 percent since August 29. Ouch! Shares have fallen to six-month lows on concern about the outlook for the Eurozone and the longer-term fate of the European currency. Consequently, players are actively taking positions in options on FXE in anticipation of the Euro’s next move.
Another 89,000 puts and 24,000 calls traded in the product today. September 138 puts, 139 calls, and 140 puts were the most actives, as some investors were likely closing positions while others took new ones in anticipation of volatility in the currency market in the days ahead. September options expire at the end of next week. source dailymarkets.com
EUR/USD forecast september 12 2011, Europe stock market forecast september 12 2011, Germany’s DAX stock predictions september 12 2011.
