TODAY’S NOTABLE MARKET ACTION

• The market is down about 0.5% with an hour to go in the trading day.  Volume is very light and breadth is mixed.  The bears do not appear in control at this juncture.  The one alarming development in today’s trade is the underperformance of the risk trade.  The Russell 2,000 and Nasdaq are both getting dinged for a near 1% loss.  Mixed signals for a market that appears to be having trouble breaking out from the 1,000 level.

• Some interesting options activity was seen in shares of Ilumina (ILMN) today.  Investors are looking for near-term weakness, but expect a rebound in shares over the long-term:

ILMN – Illumina Inc. – Shares in the company that develops the toolkit for genomic researchers slipped 7% Wednesday to $29.05 on a day when EraGen announced a strategic partnership with Illumina to access its molecular tools technology. Option activity of 21,000 lots was above normal at 14-times the typical average volume. In the short-term investors appeared to sell call options at the 30 strike expiring in December in favor of bearish puts at the 25 strike. That would indicate whatever the catalyst for today’s drop in its shares (we don’t think the alliance with EraGen ought to send them into reverse gear) is likely to remain a negative factor through year end. Last month Illumina not only disappointed at earnings but also revised its forecast down. Thereafter, however, investors appeared to expect better things from the company. More than 5,500 call options were eagerly sought as the share price shrank, with investors paying up to 1.90 per contract to lock into fixed buying rights on shares ahead of January expiration implying a 10% recovery from present. The activity caused option implied volatility to rise about 20% to 49% today.

• Goldman Sachs made one of those analyst moves that do nothing but confuse investors.  They increased their price target for BIDU to $500, but removed the stock from their conviction buy list citing the quick run-up in shares.

• Goldman downgraded shares of Target (TGT) to neutral and reduced their price target to $54.  They do not believe the firm is well positioned to benefit from the recovery.  They were also removed from the conviction buy list.

• Cheesecake Factory (CAKE) is replacing TGT in the conviction buy list as a discretionary name.  The firm has a price target of $23.

• Goldman added Analog Devices (ADI) to their conviction buy list with a $33 price target.

• Citi upgrade Pulte Homes (PHM) to a buy with a $12 price target.

• HSBC upgraded Rockwell Automation (ROK) to a buy with a $53 price target.

• BMO downgraded shares of RIMM to market perform with a $64 price target.