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Where's the Recovery?

Is it or isn't it?  That is the question.  Whether the economy is recovering or not.  Current economic data says no, and even with positive earnings data from Corporate America, you have to consider the impact of labor numbers to future earnings data.  My perspective on the recovery is that there was no "real' recovery, only a "headfake" initiated by hope and change.  The positive manufacturing data was nothing more than restocking of inventory, and unless consumers start to spend and Small Business America starts to hire the up blip in manufacturing will amount to nothing more than it is, a blip.

Government continued regulatory intrusion will limit spending by both consumers and business. The uncertainty of regulatory impact will force them to hold and save for a rainy day.

Today, Put activity on the SPY and Q's continue to be in greater numbers than Call volume.  For the SPY the 108 Put action is in the 250k range for all expiration months, with over 190k in August.  The Q's Put activity remains primarily at the 45 strike with today's volume of almost 100k contracts for all expiration months and almost 60k of those for the August expiration.  On the surface this Put activity would be considered bearish with expectation that share value will move lower in the last day of expiration for August.  I must note, however, that the particular software I'm using suggests that the Put activity in August for both the SPY and the Q's were initiated by Sellers, suggesting that the benchmarks of 108 and 45 will hold as support as the Sellers look to book extrinsic value on those options.

As I read the options activity, I see uncertainty and a gamble for the August option players, whom are bearish in the expiration months past August.  The gamble is the markets will find some bullish traction after such a significantly bearish day, because if the market continue toward the downside and those options strikes move ITM, the Sellers will look to cover their shorts, by selling the stock (assuming they are institutional Sellers).  In other words, if the Bulls don't find any traction tomorrow, then we could have another downtrend with momentum.  

There is some positive news for the Bulls tomorrow in earnings reports released after today's trading session.  HPQ, DELL, and CRM beat expectation, but so far only CRM gained any traction with the aftermarket hours crowd.

Summary:  I expect volatile action and a choppy market, and am not betting on any direction in particular.  If I had to bet on a trend, I'd choose the Bears.  I'll be looking to close some NTM short options early in the day to book profits.

Disclosure: No positions