OPTIONSMART MORNING UPDATE: Showed weakness

1. OUTLOOK: Large-cap tech stock were among the primary laggards; that caused the Nasdaq to trail the major indices. Financials helped lead the broader market on a late charge back toward the neutral line. Tech investors took a pause after Salesforce.com and Autodesk offered cautious earnings. Tech giant Hewlett-Packard was among leading decliners. Its quarterly report is scheduled for next Monday. Jefferies raised their Microsoft estimates on strong Win7 sales. The tech sector needs more positive news to resume the uptrend. U.S.futures point to a weak open. 

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2. OUR "FEAR GAUGE": NASDAQ implied volatility slipped further to 22.04 indicating that bullish sentiment still prevails.   

About Implied Volatility.  Investor fear and greed play a significant role in financial markets. The question is, how can investors measure market sentiment in an emerging market situation? How can they gauge the fear? Volatility is a well-known measure of risk in financial markets. When volatility is low, there is a lack of fear. High volatility, however, suggests a fearful markets. Volatility can be calculated in two ways. Either from historical stock price data or from current option price data. Using the second method results in an implied volatility measure. This represents a forecast of uncertainty over a specific period of time. The implied volatility on NASDAQ-100 represents the consensus of option traders’ forecasts for the index volatility over the next 30 days. It is a reflection of fear and greed amongst a wide group of market professionals. It’s not wise to ignore this parameter.

4. WISDOM NUGGETS: Don't be a hero. Don't fight the trend. Follow the money flow.

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