9:10am (EST)

We told you the volatility pick up…

The market was setting up for a steep decline yesterday but managed to bounce back in the last couple of hours after bullish traders stepped in and bought off the lows.

This is options expiration week and the kick-off of earnings season so we expected some movement.  We were impressed by the bulls ability to fight off a serious attack but the bears did do some damage to the Tech sector.

The Dow finished Tuesday with a 37 point loss and ended at 10,627 after being down as much as 95 points.  The S&P 500 got clipped for an 11 points and closed at 1,136 while the Nasdaq fell 30 points, or -1.3%, and settled at 2,282.  It was the biggest point and percent drop for the Nasdaq since the end of November.

If the bears were really serious about slowing down the ongoing rally then they would have applied more pressure yesterday.  Maybe they did and the bulls camp is just still too strong right now.

There are no heavy-hitters coming up with earnings today but on Thursday we get reports from Charles Schwab (SCHW, $19.09, down $0.02) and Intel (INTC, $20.61, down $0.34) which we will be listening to carefully.  We also have an interest in Shuffle Master (SHFL, $8.26, down $0.42) which could give us clues on how strong the recovery is or isn’t for the Casino industry.

Google (GOOG, $590.48, down $10.63) is down $9 in pre-market trading after saying it is considering pulling its search engine out of China after a series of cyber-attacks on its system aimed at identifying human-rights activists.  The company said it discovered e-mail accounts held by human-rights advocates had been accessed by third parties.

As a result, Google’s possible exit from China would be a windfall for Baidu’s (BIDU, $386.49, down $14.08) which is seeing its shares zoom this morning before the bell.  Baidu is up $59 to $445 in pre-market trading.

We have mentioned this is option expiration week but do you want to see something crazy this morning?  WATCH the Baidu January 400 calls (BPJAT, $1.60) at the open.  Folks, they will open at $45 which means if you would have bought 10 contracts yesterday for $1,600 you would be waking up to $45,000 this morning…

As far as economic news, the Federal Reserve’s Beige Book report comes out at 2pm (EST).  The report can offer clues about the Fed’s thinking on interest rates and monetary policy but we don’t expect any changes as far as a hike.  

That is all we have for now.  Current Subscribers, check the Members Area for the latest trade updates.

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