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PHLX begins trading options on Spyders!

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It was the first day of listed option trading on the S&P Depository Receipts (AMEX:SPY) $119.00 +0.47%, where the Philadelphia Stock Exchange hopes that trading in its newly listed options on the SPDRs, will prove as successful, or active, as that of the NASDAQ-100 Tracker (NASDAQ:QQQQ) $38.53 -0.05%.

SPDRs (AMEX:SPY) Option Chain - Most active 01/10/05

Traded in $1 increments, the PHLX hopes to provide investors and traders with greater liquidity and price competition through its PHLX XL electronic options trading system. Traders and investors will want to equate a $1 move in the SPY, with roughly a 10-point move in the SPX.

S&P 500 Index Option Chain - Most active (01/10/05)

I sorted today's SPX option chain by most active, and then made some relative option price comparisons as to what the closing OFFERS of similar SPY options were at the close. The SPX will most likely continue to be the derivative of choice among institutional investors/traders, but as long as investors do not over leverage in SPY option, their lower price per contract will allow access to a greater number of market participants, that may not have otherwise been able to trade options on the S&P 500 Index.

The PHLX list of options on the SPY also gives longer-term investors the ability to buy/sell calls/puts on the exact security that they may be holding long in investment accounts.

In today's 11:00 AM EST intra-day update, we took a look at the SPX chart with updated WEEKLY Pivot retracement overlaid. Here's a quick look at the S&P Depository Receipts (AMEX:SPY) $119.00 +0.47%, which edged up 56 cents on the session.

S&P Depository Receipts (AMEX:SPY) - 01/10/05 Close

I didn't review how both the SPX and SPY came very close to the massive reverse head and shoulder patterns identified earlier this fall, but if using a descending neckline, with mid-point of $114.50 at the neckline, and head at $107.00, the SPY would have come pretty close to a derived $122.00 objective. We used this pattern to derive upside after the SPY exceeded its point and figure bullish vertical count of $110.00 in December of 2003.

I had made some notes in last week's Market Monitor that after the major indices had traded below their weekly S2s from 03/08- 03/12 in 2004 (like they did last week), the strongest gains the week after (03/15-03/19) came to the WEEKLY Pivot (DIA/SPX were only indices to just barely trade their WEEKLY Pivots). If that pattern were to repeat, then this week, as well as early next week would trade lower, with a strong rebound potentially coming the week of January 24-January 28.

In the above chart of the SPY, one can perhaps see how the SPY has shown a tendency to trade bullish on closing above the $119.50 level, or the current WEEKLY Pivot.

Pivot Matrix - 01/10/05 Close

An almost exact 10-point range for the SPX in today's trade, where after Alcoa's (NYSE:AA) $30.47 -0.71% quarterly earnings report, Alcoa traded down an additional 28 cents at $30.19, while e-mini S&P futures (es05h) are unchanged at 1,191.75. The Dow Diamonds (AMEX:DIA) $106.20 +0.34% edged up 3 cents at $106.23.

I made note in today's Market Monitor, when posting the updated WEEKLY pivot matrix, that I did NOT use Friday's 10-year yield ($TNX.X) "spike low" of 41.48, or 4.148%, which may have been artificially generated from a brief and incorrect nonfarm payroll headline. The 10-year yield intra-day chart showed a spike high to 43.13 (since corrected), then a reversal back lower to 41.48 (not corrected) in the span of 1 minute.

U.S. Market Watch - 01/10/05 Close

The AMEX looks to have gotten the North American Telecom (XTC.X) 703.54 -0.57% quotes repaired with the XTC.X down 0.57%, and not the steeper 7% displayed during the better part of the entire session.

The HMO Index (HMO.X) 1,257.68 +1.92% came close to setting another all-time high after Goldman Sacks named WellPoint (NYSE:WLP) $120.70 +4.23% its "top pick" for 2005.

This weekend I was looking at some of the various ETFs to see what were the "top performers" in the first 5-days (looking for relative strength to first 5-days weakness), and "healthcare" was a reoccurring theme with the Healthcare Ss Spdr (AMEX:XLV) $30.01 +0.87% having fallen just 1.45% the first 5-days of 2005, while the Dow Jones Healthcare iShares (AMEX:IYH) $58.45 +0.67% were down 1.58% last week. Only two equity-based ETFs showed a gain. The MSCI Malaysia (AMEX:EWM) $7.29 +1.53%, which had gained 0.41%, and the Consumer Staples Spdr (AMEX:XLP) $23.24 +0.60%, which had gained 0.08%.

ETF 5-day percentage losers were the MSCI Brazil iShares (AMEX:EWZ) $20.54 -0.53%, which had fallen 7.14%, the Goldman Sachs Software iShares (AMEX:IGV) $39.90 -0.20%, which were down 6.26%, and the Russell 1000 Value iShares (AMEX:IWD) $65.06 +0.40%, which had declined 6.22%.

The Disk Drive Index (DDX.X) 116.55 +0.83% may be a bullishly spotlighted sector tomorrow after Hutchinson Technology (NASDAQ:HTCH) $32.69 +1.17% said this evening that it has shipped approximately 175 million suspension assemblies during its first- quarter 2005 (ended December). The 175 million exceeded the company's prior guidance of between 155-170 million suspensions. Hutchinson said revenue for the quarter looks to be approximately $145 million, which would be above the $137 million consensus.

Market Snapshot / Internals - 01/10/05 Close

NH/NL ratios begin to show some bullish improvement at the NYSE, where for a third-straight session, new highs expand while new lows abate at the big board. Meanwhile, the NASDAQ shows expansion of new highs for a third-straight session, but new lows slip to 29, after stabilizing on Thursday and Friday at 29.

Jeff Bailey

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