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Market Could Rest Ahead of Options Expiration

US stock futures are near the flat line Friday morning after yesterday's break out of the tight range to five-year highs in the S&P. Action could be slow and choppy today ahead of the first options expiration of 2013.

Earnings season rumbles on with a few big names reporting this morning. Morgan Stanley (MS) was the latest big-name bank to report, and the company came out with better-than-expected numbers that are pushing the stock higher pre-market. Traders will be watching to see whether the report can be enough to hold the group higher after some mixed action in the last couple days. The banks have been clearly leading the market over the past few months and could use a rest.

General Electric (GE) is also out with a strong report this morning, and the stock is up 2.8% pre-market. Scott Redler has been long GE stock and calls for the past few days.

Many think Apple (AAPL) is being pinned at $500 for options expiration. The stock tried to get in motion Wednesday, but couldn't get any follow-through yesterday. At $500 the stock would deliver max pain to traders buying puts below $500 and call buyers looking for a big snap back to the upside. Overall the stock remains heavy and out of play.

Generally speaking, we do not feel it is prudent to be overaggressive on options expiration Fridays. The action on these types of days can sometimes be very choppy and hard to explain. The market continues to act healthy but is a little quiet right now. We may need some more rest or a pullback for compelling buy areas at this point.

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*DISCLOSURES: Mike Lee is long LVS puts, DMND calls, X calls, CELG puts, CLSN calls.