The shares of Zoom Video Communications Inc (NASDAQ:ZM) are up 0.8% at $340.45 at last check, after the company announced an underwritten public offering of $1.5 billion shares of its Class A common stock. The video-conferencing name has also granted J.P. Morgan (JPM), the sole underwriter on the deal, a 30-day option to purchase up to $225 million additional shares of stock at the public offering price.

The security benefitted greatly from the pandemic due to lockdown restrictions and a massive shift to remote work. However, since hitting an Oct. 19 all-time high of $588.84, shares have been chopping lower, with pressure at the 30-day moving average putting a cap on several rally attempts during this time period. Despite this descent, Zoom stock is still up roughly 354.9% year-over-year. 

Analysts have been hesitant, too, with some changing their tune in the weeks following ZM's post-earnings plummet. Currently, the security carries 11 "hold" or worse ratings, compared to nine "buy" or better ratings. Meanwhile, the 12-month consensus price target of $487.20 is a 43% premium to current levels.

Short sellers have been building their positions as well, with short interest up 23.9% in the last two reporting periods. Now, the 9.9 million shares sold short make up a solid 30.8% of the stock's available float, or 1.1 days of trading at the equity's average daily pace. 

Lastly, ZM's Schaeffer's Volatility Scorecard (SVS) sits at 96 out of 100, indicating it has tended to exceed option trader's volatility expectations over the past year -- a boon for options buyers.

Traders kept their attention focused on last week's election turmoil and the ever-present promise of more Covid-19 stimulus relief throughout yesterday's trading session. News that House Speaker Nancy Pelosi has called for the impeachment of President Donald Trump also rippled through Wall Street on Monday. Investors seem to have begun bracing themselves for a possible market correction, following last week's slew of record highs.  

The Dow Jones Industrial Average (DJI - 31,008.69) dropped 89.3 points on Monday. The S&P 500 Index (SPX - 3,799.6) dropped 25.1 points and the Nasdaq Composite (IXIC - 13,036.43) dropped 165.5 points yesterday. The Cboe Volatility Index (VIX - 24.08) jumped 11.7% during Monday's trading session.

Today's trading session activity will pick up, featuring the NFIB small-business index, as well as the latest job openings report. 

The Dow spent most of its Monday session in retreat, finishing the day with a nearly 90-point drop, as traders kept their attention trained on last week's election turmoil and the ever-present promise of more Covid-19 stimulus relief. News that House Speaker Nancy Pelosi has called for the impeachment of President Donald Trump also rippled through Wall Street today. Meanwhile, the S&P 500 and Nasdaq Composite were also nursing sizable losses during today's trading, ending the session deep in the red, as investors begin bracing themselves for a possible market correction, following last week's slew of record highs.  

Continue reading for more on today's market, including:

• One homebuilding stock option traders are optimistic on. 
• Why Wayfair stock's recent pullback could be an attractive buy for bulls. 
• Plus, checking in with BlackRock stock before earnings; the TSLA rival that just hit a fresh high; and Amazon bans big app after last week's Capitol attack. 

The Dow Jones Industrial Average (DJI - 31,008.69) dropped 89.3 points, or 0.3% on Monday. Twelve of the Dow components finished higher, with Walgreens-Boots Alliance (WBA) taking the lead with a 5.5% surge, while Apple (AAPL), fell to the bottom of the 18 losers, down 2.3% for the day. 

Meanwhile, the S&P 500 Index (SPX - 3,799.6) was down 25.1 points or 0.7%, and the Nasdaq Composite (IXIC - 13,036.43) shed 165.5 points, or 1.3%.

Lastly, the Cboe Volatility Index (VIX - 24.08) added 2.5 points, or 11.7%.

1. Data from the National Women's Law Center (NWLC) is suggesting that all 140,000 jobs lost in December belonged to women. This is a stark contrast from one year ago, when the number of women in the U.S. workforce edged higher than the number of men for the first time since 2010.  (CNBC)
2. A new forecast from the Consumer Technology Association shows that U.S. consumer electronics retail sales are expected to grow 4.3%  in 2021 to $461 billion. The Consumer Technology Association is the sponsor of this week's annual CES trade show, which will be held virtually this year. (MarketWatch) 
3. How the world's largest asset manager is performing ahead of earnings. 
4. The Tesla rival that hit fresh highs on analyst love today. 
5. Amazon took a breather after banning Parler. 

There were no earnings of note today.

Oil Closes Flat, Gold Brushes Off Strengthening Dollar

The strengthening U.S. dollar sent oil prices toward uncertainty from last week's highs, while growing concerns over the negative effects of the coronavirus on both the commodity and the economy in general also put a damper on liquid gold. February-dated crude scraped together 1 cent, or 0.02%, to settle at $52.25 per barrel. 

Gold meanwhile, clawed its way higher. A dramatic drop in Bitcoin prices, plus talks of a market correction likely put some wind at the commodity's back, though the dollar's modest rebound put a cap on some of today's gains. February-dated gold tacked on $15.40, 0.8%, to settle at $1,835.40 an ounce.

Hotel and cruise provider Marriott International Inc (NASDAQ:MAR) announced on Sunday that its Political Action Committee would pause donations to U.S. lawmakers who voted against certifying President-elect Joe Biden's victory. A spokesperson for the company said it was taking the "destructive events at the Capitol to undermine a legitimate and fair election into consideration." At last check, MAR is down 1.2% at $128.33. 

Despite the major hit the hotel and travel sector has taken this year, MAR has managed to claw its way back from its late-March lows to touch a 10-month high of $135.84 in early December. While the equity hasn't been able to close the late-February bear gap that lead to its massive March selloff, the 40-day moving average could still move in as potential support. Plus, Marriott stock is up over 66% in the last nine months. 

Options traders, meanwhile, are optimistic. This is per MAR's 10-day call/put volume ratio of 1.42 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 80% of readings from the past year, suggesting a much healthier-than-usual appetite for long calls of late. 

This bullish sentiment is being echoed in today's trading. Already, 2,825 calls have crossed the tape -- five times the intraday average -- compared to just 116 puts. The two most popular positions by far are the February 130 call and the 135 call in the same monthly series, with positions being opened at both. 

The first week of trading in 2021 gave investors a lot to digest – from the Georgia Senate run-off elections flipping the Senate to a democratic majority, questions about the stability of our democracy after the capitol was breached by angry Trump supporters, uncertainty with respect to further stimulus after potential opposition from a democratic senator in West Virginia, to President-elect Joe Biden’s plan for $2,000 stimulus checks. And oh yes, did I mention the three house democrats that drafted an article of impeachment just days before President Trump is due to leave office?

Amid the headlines, the bulls survived, with a brief Monday morning dip back below the round 3,700 level on the S&P 500 Index (SPX - 3,824.68) before the index advanced throughout the balance of the week, surpassing the 3,800-century mark in the process.  

In fact, per the chart below, despite the headlines, some of which could have given the bulls pause, the SPX never breached the rising 20-day moving average, which sits below the first level of potential support on a pullback, which is the 2020 close of 3,756.07.  

And small-cap stocks, as measured by the Russell 2000 Index (RUT - 2,091.66), vaulted higher in a convincing manner, surpassing the psychological 2,000 millennium level that acted as a hesitation area for only a couple of weeks. For perspective, the RUT first touched the 1,000 level in May 2013 and it was in July 2013 that it finally moved through 1,000. The 1,000 level did not go away for good, however, as it was touched again in early 2016 and early last year.

In a nutshell, last week’s headlines generated moments of heightened volatility expectations as measured by sharp intraday movements higher in the CBOE Market Volatility Index (VIX - 23.65), but bulls stood their ground.   

“I find it interesting that the mid-December peak was at the VIX’s 252-day moving average. A move above this longer-term moving average in late-January 2020 hinted at major trouble ahead for stocks in February-March and another move back above this trendline in mid-October tipped off a two-week pullback in equities. At present, the VIX is not signaling major volatility in the immediate days ahead as it remains below this longer-term trendline”

          -Monday Morning Outlook, January 4, 2020

Per comments I made last week and excerpted above, what stood out to me during the height of the VIX spike on Monday was that it flirted with its 252-day moving average, but never advanced above it. During the past year, this is one of several markers that I have used for hints on the future direction of volatility expectations, in addition to things like half highs, double lows and round year-to-date percentage gains as potential pivot areas. 

The fact that the VIX did not above this longer-term moving average turned out to be a win for bulls as volatility expectations eventually retreated about as quickly as they surged, mirroring the December action that I discussed last week.

As a side note, the lowest the VIX got last year was roughly 10 percent below its 2019 close, which occurred in January.   With the 2020 close at 22.75, the level that is 10 percent below this close is 20.48, which is only slightly above the October 2020 half high of 20.14. 

Additionally, note the huge put open interest on VIX options that expire on January 20. The 18 through 22 strikes are notably put heavy, which helps make the case that a floor is in the 20 area during the next couple of weeks at least. 

With the VIX slightly above its early-December low and at a one-month low, you could hedge long positions if you have not done so already.  

Keep in mind that while the VIX is low when looking at a chart, it is double the SPX’s 20-day historical volatility, so hedging is still expensive from this perspective.  

Therefore, if you are utilizing SPX or SPDR S&P 500 ETF Trust (SPY - 381.26) puts to hedge, consider debit spreads where you buy an out-of-the-money put and then sell a further out-of-the-money put.  The upside of this strategy is that it reduces your hedging cost, but the downside is you are limited to the profit you can attain from the hedge if the market indeed succumbs to the sentiment-based vulnerability. The maximum profit, for example, is the difference in the strike prices less the premium paid.    

The market’s momentum higher is still reason enough not to disturb long positions, even though risks remains from a sentiment-based perspective. 

One area of the sentiment-based risk is in the actions of equity option buyers. Note in the chart below that that the 10-day, equity-only, buy (to open) put/call volume ratio has turned higher from the lows last seen in early-September, which preceded a difficult two-month period for stocks. The difference between now and early September is that the SPX began moving lower coincident with the ratio turning higher in early September. This turn higher from an extreme low should be on your radar as a continued market risk, but it may take a breach of the 2020 close or a short-term moving average to give the bulls pause.

Todd Salamone is Schaeffer's Senior V.P. of Research

Continue reading:

• The Week Ahead: Bank Earnings, Another Round of Jobs Data Due Next Week
• Indicator of the Week: The SPX Just Did This for the Fourth Time Since 1929 

Stocks are lower this afternoon, extending this morning's retreat from record levels, as investors continue to weigh equity valuations, stimulus anticipation, and the aftermath of last week's pro-Trump attack in Washington, D.C. The Dow Jones Industrial Average (DJI) is roughly 75 points lower at midday. Meanwhile, the S&P 500 Index (SPX) and tech-heavy Nasdaq Composite (IXIC) are swimming in red ink, as well. Elsewhere, investors are carefully watching Congress after House Speaker Nancy Pelosi said Democrats would move toward impeaching President Donald Trump again if Vice President Mike Pence fails to invoke the 25th Amendment. 

Continue reading for more on today's market, including:

• A J.P. Morgan bull note catapults Tesla rival to record highs.
• Marriott stock in focus after company cuts off several political donations.
• Plus, TWTR options under pressure after Trump ban; retail stock surges on prelim earnings; and InVitae stock plummets on dismal 2021 guidance.

One stock seeing notable options activity today is Twitter Inc (NYSE:TWTR), last seen down 6.6% to trade at $48.12, despite earning a price-target hike from Jefferies to $52 from $46. The social media giant lost nearly $5 billion in market value after permanently suspending President Donald Trump's account following last week's attack on the U.S. Capitol, spurring concerns among investors over the regulation of social networks. So far today, 185,000 calls and 183,000 puts have crossed the tape, which is six times the intraday average. Most popular is the January 2021 50-strike call, followed by the 45-strike put in the same monthly series, with positions being opened at the latter. The security just hit a Dec. 16 six-year high of $56.11, but is now testing support at the 100-day moving average. Year-over-year, TWTR is still up 46.5%.

Near the top of the New York Stock Exchange (NYSE) today is Boot Barn Holdings Inc (NYSE:BOOT), last seen up 12.1% at $54.50, after earlier hitting an all-time-high of $55.64. The major bull gap came after the apparel retailer reported better-than-expected preliminary third-quarter earnings, and a 6% guidance update. As a result, the security earned an upgrade from J.P. Morgan Securities to "overweight" from "neutral," and no fewer than four other analyst lifted their price targets. Boot Barn stock has been getting support from the 40-day moving average since August, and sports a  254.3% nine-month lead. 

Near the bottom of the NYSE today is InVitae Corp (NYSE: NVTA), last seen down 10.1% to trade at $45.99. While the firm posted a preliminary fourth-quarter revenue growth of over $278 million, its 2021 guidance missed Wall Street's estimates, likely due to COVID-19 impacts and assumptions surrounding the ArcherDx acquisition. The equity has been cooling off from a Dec. 14 all-time-high of $61.59, and this past month has been quite choppy, though the 120-day moving average has contained most of this volatile price action. Year-over-year, however, NVTA remains up 175.2%.

Wayfair, Inc. (NYSE:W) is an American e-commerce company that sells home furniture, decor, home improvement products, housewares, and other home-goods. Their platform offers millions of items from more than 11,000 global suppliers. The company also has offices and warehouses throughout the United States, Canada, Germany, Ireland, and the United Kingdom.

This past summer, Wayfair was tied into a conspiracy that had accused the company of human trafficking through its e-commerce platform. Maybe not so surprisingly, the negative publicity ended up having little to no effect on W stock price. Wayfair stock even peaked at a record-high of $349.08 about a month after the controversy broke, on Aug. 24. Since reaching this peak W has shed 26%, but so far this year, Wayfair stock has already tacked on 15%.

In more recent news, Wayfair announced that all of its U.S. employees would now make at least $15 per hour. According to Wayfair, the change meant a pay increase for more than 40% of its hourly employees working across its U.S. supply chain and customer service operations.

Despite a pretty painful year for most retail stocks in 2020, Wayfair was able to outperform Wall Street's expectations on most of its earnings reports last year. The only earnings miss was when the company reported its earnings for the fourth quarter of 2019. For the earnings reports focused on the first, second, and third quarters of 2020, Wayfair beat expectations by a margin of $0.30, $2.09, and $1.50, respectively. Analysts currently anticipate that Wayfair stock will report earnings of $0.80 per share for the fourth quarter of 2020.

Wayfair has exponentially grown its revenue in recent years, but did take a step back in its growth over the past 12 months. The company saw an annual revenue decrease of approximately $600 million, which is surprising given the current retail climate. The Covid-19 pandemic has allowed for e-commerce to flourish, which indicates that investors should be wary of Wayfair’s drop in sales over this time period.

From a fundamental point of view, Wayfair is entirely too inconsistent in its growth, and offers a lot of risk to potential investors. However, Wayfair stock price has been down-trending since the summer and is still down considerably since its peak. If Wayfair stock continues its bearish form, investors may be able to pick up this risk-laden stock at a very attractive price.

For those looking to speculate on Wayfair stock's next move with options, now seems like the ideal opportunity. The equity's Schaeffer's Volatility Index (SVI) of 63% sits in the 13th percentile of its annual range, meaning options players are pricing in low volatility expectations right now.