UUP Call Volume Explodes, Trading Halts and Nov Call Options Double

This is why the options market is so fun to watch. Whether someone knew about (or caused) the filing or not, there was definitely a trade set up in the works and an institution could have doubled $3 million+ in a single day (given the 212k volume today).

On my previous post I singled out a few blocks that traded at 0.15 on the UUP November $23 strike. Today, 212,000 contracts closed at 0.30! The ETF itself spiked to an intra-day high of $23.15 before closing at $22.86 on record volume. A spike was warranted after UUP violated the 8 month downtrend and 50 day moving average on strong volume, which could confirm a reversal if it sticks. US Dollar Index technicals are worse than $UUP's.  It is below the 50dma and 8 month downtrend. We will see who follows who going forward. Also, UUP implied volatility is trending higher at 17 vs. 10 historical vol at ISE.com. The monster call volume + trading halt/8-K filing (to issue 100 million more shares) really makes Dvol wonder who the 性交 was behind this trade, and the underlying nature. I'll be watching UUP, USDX and SPY going forward. Charts below are UUP and US Dollar Index. 

UUP Halted, 8-K Filing - Powershares DB US Dollar Index Trust

Here is part of the 8K filing from SEC.gov. It is also strange that yesterday saw a 330,000 volume day on the Nov $23 calls. $UUP is halted at $22.49. *Update, $UUP looks to be up 1.2% at 1:55.
"Item 8.01. Other Events.

On November 3, 2009, PowerShares DB US Dollar Index Bullish Fund (the “Fund”), a series of PowerShares DB US Dollar Index Trust (the “Trust”), announced in a Current Report on Form 8-K that 6,600,000 of its Shares registered with the Securities and Exchange Commission (the “SEC”) were available for purchase by the Fund’s Authorized Participants. As stated in its current prospectus, the Fund creates and redeems Shares in blocks of 200,000 Shares called “Creation Baskets” and “Redemption Baskets,” respectively. Only Authorized Participants may purchase or redeem Creation Baskets or Redemption Baskets.

As of November 5, 2009, the Fund issued all of the remaining Shares to its Authorized Participants. As a result of these issuances, the Fund will temporarily suspend the issuance of additional Creation Baskets until the registration statement on Form S-3 (333-162819, 333-162819-05) which was initially filed on November 2, 2009 and registers an additional 100,000,000 Shares of the Fund (the “Registration Statement”) has been cleared by the SEC, the Financial Industry Regulatory Authority and the National Futures Association.

The Fund will issue a subsequent Current Report on Form 8-K to announce the effectiveness of the Registration Statement and its ability to resume offering Creation Baskets to its Authorized Participants.

The suspension of the issuance of Creation Baskets has no effect on the ability of Authorized Participants to redeem Redemption Baskets.

Any forward-looking statements in this Current Report are based on expectations of DB Commodity Services LLC, the managing owner of the Trust and the Fund (“DBCS”) at this time. Whether or not actual results and developments will conform to DBCS’ expectations and predictions, however, is subject to a number of risks and uncertainties, including the special considerations discussed in the Fund’s currently effective prospectus, general economic, market and business conditions, changes in laws or regulations or other actions made by governmental authorities or regulatory bodies, and other world economic and political developments. The Trust, the Fund and DBCS undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Any terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the currently effective prospectus.

Robert Prechter: Significant Fall Coming, 2008 Just A Warm Up! (CNBC, 11/4)

Prechter is back and looks like he just saw a completed corrective wave. "This market rally is over", according to Robert Prechter of Elliott Wave International. He said stocks are overvalued when looking at historical bottoms, specifically dividend yields and P/E ratios. He also said poor market internals (lower volume, advance/decline ratios dwindling away) and extreme bullishness are other factors. He did not get into Elliott Waves, if I'm not mistaken. He should get into E-Wave details.
CNBC's Maria Bartiromo: "How significant could a fall be?"

Robert Prechter: "Very significant. We had I think a warm up in 2008 that was a big leg down but I think the one we're in will be at least that large. It's not going to be a U or W type of bottom. I don't think we've hit the V bottom yet, that's what is coming up". "I'm very bullish on the Dollar. I think it's going to be up for a year or two".

He thinks people should be in Treasury Bills not stocks, commodities or real estate. On his site he's offering a free 50-page eBook called "The Ultimate Technical Analysis Handbook".

Disclosure for FTC:  DV works as an affiliate for Elliott Wave International, I have followed Bob Prechter's work and am confident in the quality of his products and services.

Jim Iuorio: US Dollar Due For Big Spike, Trade Too Crowded (Fast Money)

Jim Iuorio on Fast Money touched on that HUGE volume on the November $23 UUP Calls today (more detailed info here).  He thinks we're due for a big spike in the US Dollar because the trade is too crowded.  If he's right, it could do some (short term) damage to the markets and carry trade (Roubini).  A total of 330,000 contracts moved today on that call strike. At 11:36pm USDX is up 0.29% to 75.87. If it breaks down here it could test $74-72 support. Are we due for a squeeze? Watch UUPKW at Yahoo Finance. If it spikes to 0.30 before November 20, someone doubled $4 million.

FOMC Statement, Market Reaction, SPY Volatile at 50dma (TLT, UUP, GLD, SPY Charts)

Here is the FOMC statement.

"Release Date: November 4, 2009
For immediate release
Source: FederalReserve.gov

Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

I looked at ETFs that track 20+ Year Treasuries (TLT), the US Dollar Index (UUP), S&P 500 (SPY) and Gold (GLD). TLT ended -0.91%, UUP -0.75%, SPY +0.26% and GLD +0.60%. So it was an uneventful day with big swings. After an initial dip and a monster spike, the rally in risk (SPY, GLD) started selling off after 3:00. Look at the chart snapshots.

FOMC Market Preview by Ashraf Laidi (CMC Markets) 11/4/2009

Here is Ashraf's most recent blog post: FX, Oil Eye Equity Inflection (November 3, 2009)

ht Stocktwits

UUP: 237,858 November $23 Calls Trade Pre-FOMC Annoucement (US Dollar ETF)

You don't see this much volume on $UUP options every day. 237,858 November 23 calls traded so far with 40,349 open. I first heard about this on Stocktwits. Looking closer at big blocks on the .UUPKW 1 minute chart (not tick): 47,800 for $0.15 moved @9:56, 36,400 for $0.10 moved @10:47 and 67,600 for $0.15 moved at 11.53. All of this action is gearing up for FOMC volatility I'm sure. Speculation or hedging is anyone's guess. A downtrend was violated recently but UUP has not cracked the 50dma yet. Traders dropped around $3.5 million so far today on these contracts. They have until November 20, 2009 to make dough if speculative. $UUP is trading at $22.54. A live streaming options chart would be great to embed right now.  I added a live $UUP chart below.

UUP volume and calls were active at the end of October also:  $UUP Volume Spiked to 2008 High, Call Volume and ISEE Ratio Analysis With Potential Trade Lurking (Link).

Hecla Beat Estimates, Stock, Calls Rage War Against $5 Resistance ($HL)

First off, Dvol has been watching Hecla Mining ($HL) since May. It has been riding the reflation trade (silver).

Thousands Of Hecla Mining Calls Open ($2.5-5.0-June, Sep'09, Jan '10 (5/20/09)
Hecla Mining Breaks Out, Calls Up On Silver Production, Cost Outlook (9/10/09)

Hecla reported earnings yesterday and beat First Call estimates by 0.09.
"Hecla Mining beats by $0.09, beats on revs Reports Q3 (Sep) earnings of $0.09 per share, $0.09 better than the First Call consensus of ($0.00); revenues rose 39.0% year/year to $95.2 mln vs the $68.7 mln consensus. Third quarter silver production was 2.7 million ounces at a cash cost of $0.85 per ounce of silver produced after by-product credits. Co reduces full year guidance for cash costs by 25% to $2.25 per ounce of silver. The co is on track to meet its full year production guidance of 10.5-11 million ounces of silver." (via Briefing/MSN)

As a result, Hecla gained 18% on 29.9 million shares, a volume level never seen before. The stock is set to rage ware against $5 resistance if it doesn't retrace some gains. Schaeffers Research came out with an excellent note about Hecla's call action the day before earnings (Option Players Bet on a Major Post-Earnings Move from Hecla Mining Company). Looking during/after the fact, call volume was still active today at the $5 strike with 6,500-7,200 contracts trading in November, December and January. The volume was under open interest on a 160% gain (for Nov) so some of that could have been fast money. The ISEE ratio was down 88% from Nov 2, however calls opened still outnumbered puts, 2.88k/116 or an ISEE value of 32.77K. Watch SLV and HL trade live below, they could get volatile.

Snapshot of $HL 11/3 (Courtesy of Stockcharts.com)

Another Breakout In Gold, Will Silver Follow? (SLV, GLD Charts, Options, Volatility)

You can't ignore gold's move today. It violated ceiling resistance and is now testing channel resistance, look at the gold chart below.  The gold ETF (GLD) is trading inside a steeper near term channel and far from channel resistance.  So do you trade off GLD or $Gold spot to game resistance.   Also, the silver ETF (SLV) rallied hard and broke above it's 50 day moving average and is around 17.50 ceiling resistance.  So will SLV follow GLD's lead here?  SLV looks like a good trade above 17.50 or below 50d/June highs (high 15s).  You can't totally factor out a potential head and shoulders pattern.  Everything moved higher on strong volume today.  This action could be setting up for the FOMC statement on rates and forward looking language.  The whole RISK trade is being tested here.  It will be interesting to see how Treasuries, the US Dollar and precious/commercial metals react tomorrow and if precious metals/S&P start to decouple.

Unusual Option Activity, Volume, Volatility and Trading Ideas for 11/3/2009

Option Activity Firehose for 11/3/2009.  I regularly visit OptionMonster, SchaeffersResearch, CrimsonMind, OptionInsider, ONN.tv, WhatsTrading, DailyOptionsReport, Vixandmore and Investingwithoptions for option information.

Unusual Options Activity:  OSIR, WFR, MU, PALM, MA, ETFC, S, AGX, XLI, MA, UNP, FRX (OptionInsider) 
Options Update: Ventas, Inc. (VTR) & Wells Fargo & Co. (WFC) (OptionInsider)
Options Intelligence Report: Life Technologies Corp. (LIFE) & Foot Locker, Inc. (FL) (OptionInsider)
Options Update: Cisco Systems Short Straddled Ahead of Earnings (SchaeffersResearch)
Option Activity Alert: McDonald's Corporation Could Face Call-Related Pressure (SchaeffersResearch)
Option Activity Alert: Bears Bet Against AngloGold Ashanti Limited (SchaeffersResearch)
Option Skews - Relatively Heavy Put Activity on Qualcomm Inc and American Express Co (SchaeffersResearch) 
Bearish signs on semiconductor ETF (OptionMonster)
Traders position for Moody's upside (OptionMonster)
Puts sold in Expeditors International (OptionMonster)
Silver bull makes leveraged bet (OptionMonster)
Downside players in VIX (Volatility Sonar/OptionMonster)

Rick Santelli vs. Steve Liesman on the Weak Dollar (CNBC)

H/T ClusterStock

US Treasury Bulls Battling Moving Averages, Fed Done Buying Treasuries (TLT, USB, UST, TYX, UST30Y)

Treasuries are at another inflection point.  The 30 Year T-Bond Price is trading right under the 50dma as well as $TLT.  The 200dma is falling and close buy.  Yields are right above the 50d and are being squeezed in a 3 year symmetrical triangle so judgment day is upon us.  The Fed finished buying Treasuries on October 29 which propped up the market and lowered interest rates.  So with decent spreads from 0-4.26% will banks (+ China) continue to support the Treasury market?  Also, if the rally in risk is at it's pinnacle like Bill Gross said, could money flow back into USTs?  I understand the argument and possibly the reason why yields are hovering above the 50d at the moment.  The US National Debt is about to hit $12 trillion (up 20%+ yoy), the monetary base doubled and there are underlying inflation and currency worries.  Not too long ago TLT broke through uptrend support (post with live TLT chart/trend).  We'll see if that move can stick.  The FOMC meets today and Wed so get ready for interesting moves (preview/Danske Bank A/S).  Charts below with trends:  $TLT, 10Y Price, 30Y Yield, 30Y Price.

Bill Gross: Six-Month Rally in Risk Assets at Pinnacle -Investment Outlook November 2009 (Midnight Candles)

Bill Gross, who runs the biggest bond fund in the world with $186 Billion under management (Pimco Total Return Fund/PTTAX), released his November investment outlook titled "Midnight Candles".  The theme is death after a brief life aka the 6 month risk rally.  He quotes a line from Macbeth, "Out, out, brief candle!" which signifies the suicide of Macbeth's wife.  Uh oh....  So Bill, which yield will be first to the party and when?  Btw he's right technically as well, TLT and Treasuries are testing 50 day moving average resistance.

Oh $DIA-ear, Do Not Break 97.13! (DIA ETF Chart aka $INDU, Industrials)

DIA (Dow Jones Industrials ETF) is testing trend support (inverse rising wedge?) and the 50 day moving average at 97.13. If those levels are violated (they could hold), look at the chart and pick the next support level. The June plateau ($88) looks like big support imo.  Also yesterday DIA saw a red volume day not seen since March.  DIA busted through a rising wedge from the March lows.  Relative strength is at 45.67 and MACD at 0.33.  It is trading at 97.29 right now.  Here is a large 9 month chart of DIA with wedges, 50dma, support, volume etc.

S&P Dec E-mini Future Weak After Testing 50 Day Moving Average (ESZ9)

The S&P Dec E-mini Future is losing strength at the 50 day moving average and short term downtrend resistance.  It is also testing long term channel support from August.  The 50dsma is at 1,048.06 and ESZ9 is trading at 1,038 after hitting a high of 1,049.  Watch that channel from AUG closely (in the blue line) going forward.  The June highs look like a nice plateau, we'll see.  What you don't want to see is a 20/50dma cross to the downside.  Watch out for that.  Charts courtesy of OptionsXpress.

Performance Gap Between Baltic Dry Index, CRB, Transports, $SEA and Shanghai Index (October, 2009)

How crazy is this market. The $VIX spiked 23.95% (Friday), Baltic Dry Index gained 3%, CIT Group filed for bankruptcy (one of largest in U.S. history), China's PMI hit an 18 month high (55.4) and US manufacturing "expanded in October at the fastest pace in more than three years" (55.7). $ES_F is up 1.38% right now (SPX emini future).

Also look at the one month performance gap between the Baltic Dry Index, CRB Index, Shanghai Index, Transportation Index ($TRAN) and Shipping ETF ($SEA). In October: $BDI +31.65%, $CRB +6.92%, Shanghai Index +2.89%, $SEA +2.48% and $TRAN -2.15%. That is a huge performance gap! Perhaps the BDI is playing catch up on the 3-5 month charts. Is China oversupplied or are commodities just getting started? Here are recent "backward looking" articles on China's growth, iron ore demand and 9 month/September import data. View the charts below.

David Rosenberg: GDP Won't See 4% In 2010, Market Will Be Lower By Year End (Bets Terranova)

David Rosenberg was on Fast Money by phone last Thursday.  Here is what he had to say about the Q3 GDP number.  Is 3.5% sustainable?  He's been battling the bulls for a while.
  • He thinks Bernanke probably has 1937-1938 on his mind so no exit strategy any time soon...
  • "There's was just so much medication that the Government administered to get that 3.5%. When you really do your due diligence and look through the number and strip out all the stimulus from cash for clunkers to home buying credits to Government spending. Actually when you look at the economy organically outside all the stimulus it was a flat number."
  • Stance on market:  "Very defensive right now.  The stock market right now is de-facto, pricing in over 4% GDP growth in the next year, and I'm not really in the double dip camp, but neither do I think we see 4% GDP growthCaution is the operative watch word."   (Pimco's El-Erian sees 2% next year btw)

The Fast Money crew (Tim Seymour/Terranova) battle his views.  Joe Terranova bets David Rosenberg that the market will be higher by year end. How about another Bolling v. Cramer bet?

Pimco's El-Erian 2010 Outlook: Still Sees 2% 2010 Growth, Market Pricing In 4%

Video from CNBC.com. Pimco's El-Erian still sees 2% growth in 2010 while the market is pricing in 4%.

Also inter-market analysis after GDP report: Q3 GDP 3.5%, SPY, UUP Bounced Off Support/Resistance, 50d (Charts, 10/29) (Distressed Volatility)