This Friday (September 18) marks what is known as "quadruple witching" – the simultaneous expiration of four types of futures and options contracts. With no major economic data on schedule for release, traders might resort to profit taking - this can lead to increased volatility.
Sectors that I see active play in today include defense and aviation, oil, Russia.
Defense and aviation
The Obama Administration announced Thursday that it is revamping plans to build a missile defense system in Eastern Europe. This effectively scrapped predecessor George W Bush's Star Wars missile defence shield for Europe. Stocks of those companies which have depended on the continuation of Star Wars would be negatively affected. However, this will have a positive impact on Russia incorporated companies that are trading on American bourses as the new plan eases tensions with Russia. It also opens the way to a major US-Russia deal to cut their nuclear arsenals, possibly as early as next week.
The new plan would deploy the interceptors in areas closer to Iran starting in 2011, first at sea and then later on land in Northern and Southern Europe. The 2011 start date marks the beginning of phase one of the plan, with three more phases set to be implemented in 2015, 2018 and 2020. Under the new program, instead of focusing on a ground-based system, the United States will increasingly deploy sea- and land-based missile interceptors.
Oil
Since the new plan eases geopolitical tensions, oil stocks could also gain due to sentiments. Even otherwise oil related stocks seem to gain. On September 16, oil jumped a full dollar to $71.50 in immediate reaction to a big 4.7 million draw in crude stocks during the Sept. 11 week. Demand data for gasoline are also bullish, now showing a strong plus 3.5% year-on-year rate. Refineries produced less gasoline in the week but more distillates where stocks continue to build ahead of the winter-heating season. Oil prices have held firm despite heavy supply, and signs that supply may now finally be easing and that demand is finally improving are likely to spark talk of a higher price range beyond $75.
Russian stocks
Russian President Dmitri Medvedev said Obama administration's new plan signals a positive step toward U.S.-Russia cooperation. This should help improve sentiment on Russian related stocks.
Bullish on the following stocks
Looking at the after market and pre market trading, I am bullish on Chevron (CVX). Chevron was reportedly upgraded to "outperform" by analysts at Credit Suisse, which said other oil majors will likely struggle to grow production to 2020. In addition to lifting its rating from "neutral" to "outperform," Credit Suisse raised its price target on Chevron from $70 to $80.
Northrop Grumman, Lockheed Martin Corp (LMT), AMR Corp., the parent company of American Airlines and American Eagle, Vimpel-Communications (VIP), and Golden Telecom, are some of the stocks I see an active play.
