OPTIONSMART MORNING UPDATE: Unable to hold gains

1. OUTLOOK:Consumer confidence rose in December, hitting the highest point in three months thanks to a better outlook on jobs. However, this positive news failed to ignite the market. Nokia has filed a complaint with the United States International Trade Commission alleging that Apple infringes Nokia patents in virtually all of its mobile phones and computers. Thomas Weisel raises their Microsoft tgt to $35 from $31. Piper Jaffray raises their Amazon tgt to 172 from $163. QQQQ implied volatility continued to rise. It looks like bullish sentiment fades away. Upside seen limited. We expect a mild short-term correction very soon.

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2. FEAR GAUGE: QQQQ implied volatility continued to inch higher.  

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. 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: The human side of every person is the gratest enemy of the average investor or speculator.

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