Acknowledge Earnings Reports Today – Coach ($COH), Disney ($DIS), Tribune ($TRCO), Solar City ($SCTY)

The S&P 500 continues the grind to new highs in quiet fashion Tuesday. After adding dropping 1.98 points Monday, the index has added another 5.34 points to 2186.23 and near session highs.

Treasury bonds are also higher after a report showed a surprise .5% decline in productivity in the second quarter. The yield on the benchmark ten-year sits at just 1.56%.

Crude oil is flat at $43 per barrel and gold has erased early losses to add $5.5 to $1347.

On Wall Street, nine of ten market sectors are higher, led by Consumer Staples (XLP), Healthcare (XLV), and Technology (XLK). Energy (XLE) is the only sector seeing weakness.

On the options front, CBOE Volatility Index (VIX) is down .40 to 11.10 and falling to one-year lows. Trading in the options market is slow for a second day, with 2.4 million calls and 2 million puts traded through the first 90 minutes Tuesday. Projected volume for the day is 12.3 million and 20% below the one-month daily average.

VIX Sep 13 puts, VIX Sep 22 calls, and VIX Aug 13 puts are the most active options.

While it’s easy to get lulled to sleep by today’s churning markets, it’s also important to note that trading was equally quiet a year ago when VIX was also near current levels. That, however, proved to be a “calm before the storm”. By late August, the volatility index had touched more than 50 and options volumes were near record levels.

For that reason, it’s also interesting to note that one player bought a massive 100,000 block of VIX September 22 calls as the index fell to 52-week lows Tuesday morning. Therefore, one big fish in the VIX options pit seems to be positioning for a return of market volatility between now and September 21, 2016.

Meanwhile, the chart below shows the recent action of the SPDR Retail Trust (XRT). The exchange-traded fund holds a basket of shares of leading retailing names and is ticking lower today, being led by a 3% drop in Target (TGT). While the S&P 500 is setting record highs, the Retail ETF is a far cry from the highs of more than $50 per share seen in August last year.

See Tradespoon’s Stock Forecast on SPDR S&P Retail ETF (XRT)

Tradespoon’s Stock Forecast on SPDR S&P Retail ETF (XRT)

Furthermore, as we can see from the chart, shares of the Retailing ETF saw notable selling Monday and Tuesday morning last week, as shares dipped to test the 50-day moving average and then rebounded sharply throughout the remainder of the week. Now, however, the sector is seeing relative weakness once again and the lackluster action comes ahead of a boatload of earnings from the sector, including Macy’s (M), Kohl’s (KSS), Nordstrom (JWN), JC Penney (JCP), and Dillard’s (DDS) later this week.

Suffice it to say, the retailers will be worth watching ahead of a historically volatile period for the equities market and as the group continues to lag the market. Look for XRT to find support around $44, $43.50 and along both the 50 and 200-day moving averages. Resistance likely at $44.50, $45 and $45.50. The S&P 500 is setting record highs and seeing some resistance around 2186. Short-term support is likely at 2180, 2175, and 2169.