Overall Market Volatility: The major market indices saw solid gains this past week on mostly positive economic data. However, these gains have pushed the fear indices to support and this could spell trouble for stocks this coming week. This past week, the Nasdaq ($COMPQ) added 36.49 points, or 1.48 percent, to 2,496.31. The Dow ($INDU) tacked on 186.74 points, or 1.48 percent, to close at 12,767.57. The S&P 500 ($SPX) gained 17.48 points, or 1.22 percent, to 1,455.54. 

The CBOE Market Volatility Index ($VIX) fell 9.73 percent this past week to close at 10.02. The 10 level has acted as support on several occasions and often leads to some profit taking of consolidation once hitting this level. The Nasdaq Volatility Index ($VXN) fell 13.31 percent to 14.83. Support at 10 for the VIX has kept stocks from rising too far, with each test resulting in some profit taking. The VXN is also now near support, spelling trouble for the Nasdaq as well. 

Traders were pleased to see that inflation pressures are easing from data released this past week. However, the CPI on Wednesday will be closely watched to see if inflation at the consumer level is also moderating. So far, despite some weakness in manufacturing and the housing sector, the economy seems to be growing at a moderate pace and this is just what the stock market wants to see. 

High Volatility: NFI shares suffered this past week as mortgage lenders took a hit. However, the stock was already in a tailspin, falling from $30 a share in mid-December to a price of $17.19 on Friday. Nonetheless, the stock found support just above $15 and it seems the worst is over. With IV high for NFI options, now might be a good time to enter a credit spread. Using the March 17.50-15 bull put spread, we can bring in a $110 per spread with a risk of $140. However, the stock only needs to stay above $16.40 to make a profit.

Low Volatility: Energy prices have fluctuated quite a bit of late and this has led to a lot of volatility in shares of XOM. However, in the past six weeks, the stock has been stair-stepping higher and has recently formed a nice ascending triangle. XOM is using its 50-day moving average as support and the $76 level as resistance. On Friday, the stock closed at $75.29. The stock looks poised to break through this resistance so a trader might want to use a call or a bull cal spread to take advantage of this break. However, if XOM shares close below their 50-day moving average near $74.50, it could lead to sharply lower prices. 

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site