Schaeffer's Daily Market Blog Features: Microsoft, General Motors, Dell, VCA Antech, and IBM.

CINCINNATI -- Among the stocks featured in the July 12 edition of Schaeffer's Market Blog are Microsoft (NASDAQ:MSFT), General Motors (NYSE:GM), Dell (NASDAQ:DELL), VCA Antech (NASDAQ:WOOF), and IBM (NYSE:IBM). Schaeffer's Market Blog is just one of the many free market commentaries written every day at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. The Market Blog is written throughout every trading day by Schaeffer's financial analysts and traders. They are quick insights to the day's most notable market activity from an options perspective. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB12M&PAGE=1 .

Schaeffer's Market Blog for Wednesday, July 12, 2006:

Below are just a few of today's Market Blog entries. Click here to read all of today's Market Blog. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1 .

9:54 AM Free Stock Picks in our Podcast Interviews

Don't forget that many of our observations are available as audio presentations that you can hear on your computer or download from Apple's iTunes Music Store to play on a portable device such as an iPod. To see the full menu of observations, please visit http://www.schaeffersresearch.com/commentary/podcasts/.

11:08 AM Microsoft Straddle Trade

Just after the open, we saw a flurry of activity in the options pits on Microsoft (NASDAQ:MSFT). The stock's July 22.50 put (MSQSX) began the day with open interest of 89,843 contracts, but 12,152 have changed hands so far this morning. At 9:33 a.m. Eastern time, a block of 3,440 contracts crossed the tape on the International Securities Exchange (ISE), the electronic option-trading exchange, at 30 cents. A moment later, on the Chicago Board Options Exchange, another 4,403 traded, also at 30 cents. Prior to these trades, the bid price was 25 cents and the ask was 30 cents, suggesting that these contracts were initiated by a buyer. At 9:40 a.m., another 1,671 contracts changed hands at the ISE. It was marked as a straddle, a transaction where an investor buys a put and a call with the same strike price and expiration date, in the hope that the stock will make a significant move one way or the other. Sure enough, 1,671 contracts of the July 22.50 call (MSQGX) traded on the ISE at the same time. At last check this morning, MSFT was trading down more than one percent at $22.83. Yesterday, it lost the support of its 10-day moving average, and this morning it has fallen below its 20-day trendline.

11:49 AM General Motors Options are Popular Today

There was some heavy options trading on General Motors (NYSE:GM) this morning. The January 2007 22.50 put (VGNMX) began the day with open interest of 73,640 contracts and we saw 20,028 puts trade within the first half hour of the day. At 9:55 a.m. Eastern time, a block of 10,000 contracts changed hands on the American Stock Exchange at $1.85. About a minute later, another 10,000 traded at 1.90. At the time, the bid price was $1.85 and the ask price was $1.95, so these contracts were most likely sold. Meanwhile, the January 2007 30 put (VGNMF), which had open interest of 91,414 at the start of the session, has already seen volume of 10,154. These traded at the same time on the same exchange in two large blocks. The first comprised 7,500 contracts and went off at $4.80. Then another 2,500 contracts traded at $4.70. The bid was $4.60 and the ask was $4.80 at that time. GM was trading at $29.56 at last check, so the January 30 puts were close to the money. Those January 2007 22.50 puts were far out of the money, perhaps sold for premium to offset the cost of the 30-strike contracts.

GM has been in an uptrend lately, and is currently consolidating at the 29 level. The stock's 10-day and 20-day trendlines made a bullish cross on June 26, and the 10-day trendline is now ascending into the area and may give the stock a boost before the week is over.

12:33 PM Dell Hits New Low on Negative Brokerage Comments

UBS reiterated Dell (NASDAQ:DELL) at "neutral," and cut its fiscal second-quarter outlook and 12-month stock price target, on concerns that sales are slowing, European markets are weak, and demand in the corporate PC and servers markets is falling. Analyst Benjamin Reitzes at UBS said he expects earnings for the quarter ending July to come in at 31 cents per share, with revenue of $14 billion. He lowered his stock price target to $24 from $26. DELL was down more than three percent at last check, at $22.62. According to Zacks, almost one third of the covering analysts still see DELL as a "strong buy," so there is room for downgrades, which could add selling pressure. This morning, the stock fell to the lowest levels we have seen since February 2003.

1:47 PM Technology Weakness Continues

Call options are active on the Nasdaq-100 Trust (QQQQ) and the Semiconductor HOLDRs Trust (SMH) despite extreme weakness in the semiconductor and broader technology sectors. The weakness has been precipitated by earnings warnings from several industry heavyweights. Some of the call option volume could be liquidations, but the activity is suspicious nonetheless. Calls are outpacing puts by a ratio of two-to-one on the QQQQ and nearly five-to-one on the SMH. Optimism amid price weakness can be a harbinger of further deterioration.

3:56 PM VCA Antech Higher on Gloomy Day

There's not much to cheer about today if you're a bull. But when I look out on the red sea of flickering ticks, I can see a few of bright spots. One is VCA Antech (NASDAQ:WOOF), the country's largest operator of animal hospitals. The stock is up more than one percent and is trading at its high of the day. After rising in seven consecutive sessions from June 23 to July 3, the stock made an orderly retreat to expected support near 31.50. Today's move higher against a weak market suggests the stock has more upside in it. WOOF is scheduled to report second-quarter earnings results on Wednesday July 26. Earnings have caused some sharp moves in the stock for the last few quarters.

5:02 PM IBM Hits Annual Low

IBM (NYSE:IBM) shed 1.3 percent to hit an annual low at $75.48. J.P. Morgan analyst Bill Shope trimmed his revenue forecasts and said that he continued to believe that the company's growth expectations through 2007 "are unrealistic given current competitive pressures." He now expects second-quarter revenue of $21.81 billion, versus his previous estimate of $21.99 billion, and cut his 2006 forecast to $90.21 billion from $90.39 billion. Furthermore, he slashed his 2007 revenue forecast to $93.73 billion from $93.92 billion, but left his earnings estimate at $6.09 per share.

From a technical perspective, the stock might find sound support at the 75 level, but it is trading beneath its 10-unit and 20-unit daily, weekly, and monthly trendlines, which are all in decline.

Only about half a percent of the stock's float is shorted, so there's little fuel for any short-covering support, and little immediate likelihood of short covering anyway. The stock's Schaeffer's put/call open interest ratio (SOIR) is lower than 74 percent of those taken during the past year, telling us that expectations in the options pits are relatively high, too. According to Zacks, eight of the 15 analysts who express a preference award IBM a "strong buy," leaving plenty of room for downgrades.

For more information on these stocks or any stock in your portfolio, feel free to visit our Schaeffer's Equity Scorecard feature. Click here to read all of today's Market Blog: http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1 .

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Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .