The Stock Index Report by Carley Garner

[carleygarner]

February 19th, 2009

Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!


Stock index futures flat-line ahead of option expiration.


A strong open failed to lure additional buying as traders simply have no incentive to bid the markets higher. If technical aspects were enough to move the markets, we should have witnessed some follow through buying to this morning's move. However, market psychology is damaged and it has been more rewarding to be a bear.

The cash market Dow, as well as Dow futures, have spent the week hovering near the late November lows. However, the S&P and remained consistently above such levels and the NASDAQ even more so.

Many have questioned the inherent strength of the NASDAQ. Clearly, the index hasn't been in rally mode but it has lost considerably less than the other major indices. The most reasonable explanation that I can think of is simply the lack of banking stocks and the fact that tech companies are within arm's distance from the housing crisis. However, with that said it has been estimated that even if Citigroup and Bank of America share prices fall to zero it would only shave about 72 points from the value of the Dow Jones Index.

The SEC uncovered yet another ponzi scheme, this time it was a Hawaii -based firm known as Billions Coupons that preyed on deaf investors. According to the government agency, Billions Coupons and its CEO Marvin R. Cooper raised more than $4.4 billion from a little over 100 investors in the previous year and a half. The money was solicited through seminars at community centers for investors that were hearing impaired. Allegedly, Cooper used at least $1.4 million in the collected funds to purchase a new home and cover personal expenses.

It is stories like these that continue to drizzle pessimism onto Wall Street. However, it is stories such as these that makes me take a step back and look at the big picture. It is hard to imagine investor sentiment getting much worse. It is to the point at which many have simply given up on the prospects of a recovery in stocks. It is this attitude that typically precedes a major low. While I can't rule out at least one more leg lower in the indices, it is clear that the bear case is beginning to run its course.

Based on today's close, the markets are looking relatively weak. However, it seems as though selling put premium against a down move toward the 940 area is a good play in that if it happens, the implied volatility built into the option premium will allow for expensive put prices.

The markets are tricky that this level. There seems to be a small window of opportunity for the bears to take the S&P to 740 and the NASDAQ to 1137 but the risk of a sharp short covering rally is increasing exponentially. If you are short this market, tighten stops and proceed with caution.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.



NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

February 23rd, 2009

Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!

Equity Index Futures are consistently weak.

The trend is your friend and the bears seem to be enjoying the relentless selling and intermittent opportunities to sell into rallies. Today's selling came on the heels of an overnight rally that brought the S&P futures near 786 in the electronic night session. It was noted that the price destruction appeared to be more dependent on a lack of interest in the market than overwhelming selling.

Coming into the week we were leaning slightly higher, but aware of the possibility of an S&P retest of the November lows. Now that we are here, we are growing increasingly bullish but cautious. I cannot think of a time in which investor sentiment has been at such dismal levels and this is often a precursor to a bear market bounce. Even in November, the weakness was panic driven as opposed to an outright lack of faith in the system as we are experiencing now. Warren Buffet always says, "Be fearful when others are greedy and greedy when others are fearful". If the indices can hold support, we could be in store for a surprisingly large short squeeze. On the contrary, all bets should be hedged or monitored closely as a break down may easily lead to the infamous capitulation in which you do not want to be on the wrong side of.

Additionally, in the coming days President Obama and Tim Geithner will have an opportunity to "redeem" themselves in term of policy clarity. Any possible shred of hope in the new administration's plan may be enough to catalyze the short covering rally that we are predicting. That said, I think that we have all noticed the correlation between the stock market and speeches from the Obama camp. Tomorrow President Obama will address a joint session of Congress and Fed Chairman Bernanke will testify before the Senate Banking Committee on monetary policy at 10 am Eastern.

Believe it or not, we think that the S&P could make its way back to 817 in the coming week or two and the Dow could see 7,800. Resistance in the NASDAQ will be found at 1205...assuming that we can get a short covering bounce.


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

February 24th, 2009

Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!


Bernanke sparks rally on Wall.


Federal Reserve Chairman Ben Bernanke offered some temporary solace from the doom and gloom portrayals that have plagued the media. While Bernanke was clearly disappointed in the current health of the economy, he predicted that the there is a "reasonable prospect" that the recession will end this year. With that said, he also noted that the economy is likely to continue contraction in the first half of 2009.

Bernanke's proclamations weren't necessarily the rosy picture that we would like to see, but it was enough to tweak the nerves of the shorts. As those with bearish positions began to cover, buy stops were triggered to add frenzy to the buying.

While "Big Ben" may have been the catalyst to the rally; it is up to President Obama to keep the torch lit. He will be speaking tonight at 9 pm EST in regards to his plans to help stabilize the financial system. He is also expected to prep the public on the idea that more "stimulus" could be necessary.

In yesterday's market commentary, we noted the possibility on a short covering rally compliments of the plethora of speeches out of Washington...so far so good. We could see some back and filling but overall we are still looking for the projections made in yesterday's newsletter:

Believe it or not, we think that the S&P could make its way back to 817 in the coming week or two and the Dow could see 7,800. Resistance in the NASDAQ will be found at 1205...assuming that we can get a short covering bounce.


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

February 25th, 2009

Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!


Choppy trade as shorts cover on dips


Ben Bernanke seemed to have revived the financial markets, at least temporarily, for the second consecutive day. At one point the S&P was trading nearly 20 points into negative territory; however, details provided for "stress tests" and the granting of immediate access to further government support from the $700 billion bailout fund managed to turn stocks around in late session trade.

Bernanke clearly stated that there are no talks in regards to nationalizing the banks. Accordingly, the Treasury Department announced that the government is prepared to purchase preferred shares of bank stock that are convertible into common shares. They expect to do so at a discount of 10% of their price before February 9th.

Stress tests conducted by the government to ensure that the banks have enough capital to survive a downturn are expected to be completed by the end of April. The results of the test will determine whether or not additional assistance is needed and will test their ability to survive even rougher conditions than they now face.

Investors seemed to enjoy the details of the plan, or at least the bears saw it as enough of a threat to cover short positions. However, the indices are plagued with a "sell all rallies" mentality. Until the attitude toward the markets change, this will prevent any sustainable gains. That said, the only event that is capable of triggering such a dramatic change in sentiment is a large short squeeze. Once the market reminds the bears that there are no "free lunches", stability may return.


Today's choppy trade and weak close has thrown off our technical analysis a bit. There is still substantial risk of a short covering rally, thus the bears should avoid getting comfortable. In fact, we see potential for over 800 in the S&P and 7,800 in the Dow. However...Wednesday's late day sell off may lead to another flush out before the rally can occur. We like selling puts and or buying calls against sharp weakness. If we do get a flush out of the longs and a spike in the VIX you may want to consider one by two ratio put spreads as an attempt to take advantage of the volatility. The spread could be used for speculative bears or as a hedge against bullish positions.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

February 26th, 2009

Pick up your copy of "Commodity Options" published by FT Press in any major bookstore or online retailer!

Weak housing, weak jobs...weak stocks

An impressive overnight rally quickly fizzled....as they all do. Nonetheless, the day wasn't a disaster. It certainly could have been given the poor economic news and the event risk over President Obama's budget release.

According to the U.S. Census Bureau, new home sales were down 10.2% from December 's pace and less about half of what it was a year ago. Weekly jobless claims were equally as depressing. The U.S. Labor Department reported that claims were up 36,000 to 667,000; this was the highest level in 16 years.

Also working against the indices; the FDIC announced that there were 252 banks that they have categorized as troubled; this is well above the 171 in the third quarter.

The White House released its 2010 budget on Thursday, given some of the inclusions it seems as though a moderate down day in equities should be considered a victory. In fact, it seems as though the markets are vulnerable to a considerable slide in tomorrow's session as investors and traders get a chance to look over the details regarding business and investment tax increases. Additionally, President Barack Obama anticipates another $750 billion bank bailout this year.

Coming into today I was relatively confident that we would see the S&P rally to 800. My assumption was based on the idea that technical short covering would have the ability to fuel a sizable rally. However, following the mid-day sell off I began second guessing my original analysis. In fact, I now believe that the odds favor more weakness before the market can turn around. I am looking for about 735 on the downside in the S&P and 7,000 in the Dow. The NASDAQ could see 1,095.

Our clients were recommended to take a profit on the March 660 puts this morning on the rally near an option premium of $4.20 for a profit of $190 per mini contract ($950 if you are trading the full sized S&P).


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.
• February 26 - Our clients were recommended to take a profit on the March 660 puts this morning on the rally near an option premium of $4.20 for a profit of $190 per mini contract ($950 if you are trading the full sized S&P).

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

February 27th, 2009

Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com (discounted for a limited time)!


Equities avoid early morning meltdown


When traders turned on their computers this morning, the financial markets appeared to be fighting what could have turned out to be somewhat of a meltdown. With broad based indices at or near their November lows on a Friday morning, it isn't hard to imagine panic selling to cascade into a sharp decline.

The original selling came on the news of the U.S. government taking a large stake in common shares of Citigroup. Wall Street doesn't look favorably toward government intervention in business and any form of nationalization that may follow. Shares of Citigroup plunged anyway suggesting that market participants are questioning the government's ability to properly manage the bank.

As if Citigroup woes weren't enough, the U.S. economy shrank at an annual pace of 6.2% in the fourth quarter. This was worse that the already dismal expectations.

On a side note, the Dow Jones Wilshire 5000 index, one of the broadest measures of the U.S. equity market, id down over 50% and $10 trillion from the October 2007 high.

We were right to suspect some selling in today's session but slightly underestimated the magnitude in the S&P. As of Friday's close, our downside targets of 7,000 in the Dow, just under 1,100 in the NASDAQ and 735 in the S&P appear to be trying to hold. However, I am unwilling to try to pick a bottom at this point. I prefer to see how things open up on Monday. Support in the S&P looks to be near 725 and again near 712. Dow traders may see a slide to 6,930ish.

Should we see strong selling in early trade, I may favor selling puts against the move. Also, the increased volatility should allow for a good opportunity for ratio put spreads...stay tuned.

P.S. If you are interested in option selling, or option spread trading in the stock indices order a copy of my book "Commodity Options". If it saves you just 1 tick in the markets, you will have recouped most of your investment!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.
• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.
• February 26 - Our clients were recommended to take a profit on the March 660 puts this morning on the rally near an option premium of $4.20 for a profit of $190 per mini contract ($950 if you are trading the full sized S&P).

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.



NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 2nd, 2009

Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com (discounted) or Borders.com!


Global equities spiral


Early morning news of AIG posting the largest quarterly loss in U.S. corporate history and the government's pledge to put even more money in the black hole known as American International Group sent equities spiraling lower. The Dow traded below the 7,000 thresh-hold for the first time since May of 1997.

The U.S. government originally injected $150 billion into AIG and is now loaning the former insurance giant $30 billion. Investors are also worried about the health of the global banking system in light of struggling European banks such as HSBC, which reported a 70% drop in 2008 earnings.

Bill Strazzullo, chief market strategist for Bell Curve Trading noted that "As bad as things are, they can still get worse, and get a lot worse." According to the analyst, there is a chance for the S&P 500 to trade as low as 500 and the Dow 5,000 to bring the indices to their 1995 levels. I am not as pessimistic as Mr. Strazzullo but I think that his interpretation of the weakness in the market is valid.

While the market is at risk of a sharp short covering rally at any time, my chart analysis suggests that major support may not be found until 677. Similar support in the Dow lies at 6,720 and near 1020 in the NASDAQ. I am looking for a relief rally but suspect we will see a little lower before we see higher prices.

We were recommending selling the March 620 puts for $8 or better, but later changed our price to $7.25. Assuming a fill at $7.25 or $362.50 per mini - contract ($1,812.50 for the full sized contract) the max profit is the amount collected minus commissions and fees. The risk is theoretically unlimited beneath 620. Keep in mind that our intentions with this position is to be extremely nimble, a quick profit should be taken as overstaying a welcome could be disaster.

P.S. If you are interested in option selling, or option spread trading in the stock indices order a copy of my book "Commodity Options". If it saves you just 1 tick in the markets, you will have recouped most of your investment!

Sorry so short, we are a little behind. Feel free to contact us if there is anything that we can do for you.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 2nd - Sell a March S&P 620 put for $7.25 or better ($362.50 in a mini and $1,812.50 for a full sized contract). Place an order to buy this back at $3. The risk is unlimited and the profit potential is limited to the premium collected. Be careful with this one!

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 3rd, 2009

Option traders, if "Commodity Options" can save you one tick...you will recoup most of your investment. Get it now through Amazon.com (discounted) or Borders.com!


Slow data day, but lots of chatter


There were only a handful of government economic reports released during the session, but comments from President Obama and testimony by Fed Chair Bernanke and Treasury Secretary Timothy Geithner kept traders on their toes. Some of the mid-day buying was enticed by Obama's claim that share prices are a potentially good deal at current levels. However, the good mood didn't last.

Bernanke wasn't the cheerleader today that he was a few weeks ago but all in all there wasn't an overwhelmingly negative response to his Congressional testimony. Lawmakers were relatively hard on the Fed chair when it came to the latest bailout of AIG. Nonetheless, Mr. Bernanke insists that the economic recovery hinges on the government's success in stabilizing the financial markets and this includes the larger players. He didn't speak highly of the operations of AIG and the circumstances that allowed for their demise. "I share your concern, I share your anger." He added, "It's a terrible situation, but we're doing this to protect our financial system and to avoid a much more severe crisis in our global economy."

On the economic front, GM sales in the U.S. dropped 53% in February. The firm intends to produce 550,000 vehicles in North America next quarter. In the same quarter in 2008, GM made 834,000. Ford sales weren't much better, they reported a decline of 48% last month.

In yesterday's newsletter, we mentioned that we were looking for a "relief rally but suspect we will see a little lower before we see higher prices." Although, we did see lower prices in today's session as we were predicting, it seems as though another day of declines is likely. That said, it seems as though a major low is setting up. If you are short this market, you should be playing with tight stops as the backlash could be vicious. Option traders should be buying calls and selling puts...or all of the above. I like buying the April 800 calls for about $7 in premium.

We see major support in the S&P at 677 but once the short squeeze begins we could see 791 in short order. Support in the Dow is now 6,620 but with so many bears a turnaround could lead to a push toward 7,400. We still see 1020 as the next major support in the NASDAQ.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 2nd - Sell a March S&P 620 put for $7.25 or better ($362.50 in a mini and $1,812.50 for a full sized contract). Place an order to buy this back at $3. The risk is unlimited and the profit potential is limited to the premium collected. Be careful with this one!

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 5th, 2009


"Breaking the Buck"


The term "breaking the buck" is normally only used in reference to money market funds. However, given the recent demise of stock prices it is beginning to be a relevant description of what where once considered blue chip stocks. Citigroup shares hugged the $1 mark much of the day.

Chinese officials had hinted at additional stimulus yesterday but their retraction of such intentions today put a significant amount of pressure on equities. Todd Salamone, senior vice president of research, Schaeffer's Investment Research commented, "...this continuous (cycle of) hope leads to disappointment."

The day and day out bleeding on Wall Street has left the market at historically low confidence levels. Accordingly, there are a significant number of short speculators. Commitment of Traders data in the futures market suggests that both small and large speculators are betting largely on the downside...or at least they were last Friday.

Typically when the market is too short, the selling dries up. Not because people are no longer bearish or because the news is necessarily better, there is just nobody left to sell. Unfortunately, once the last man get short (or the last buy and hold investors gets out) the market takes the opportunity to punish all of those involved. Yesterday's short covering rally was a glimmer of what could be in store for the bears. However, it seems as though the S&P may look to trade in the 860's first; we see support near 666. The Dow may trade as low as 6,400.

Tomorrow's employment report will be a large factor in the day's trade. We believe that the market has priced in a horrible number and the odds favor a positive reaction in stocks. With that said, an immediate dip on the news should be considered an opportunity to get long with either futures or options. We like trying to sell the 590's for $7 in premium. Aggressive traders may be interested in getting long near 667.


Register for a free 1-year subscription to Futures Magazine on DeCarleyTrading.com!


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 3rd - I like buying the April 800 calls for about $7 in premium.


March 2nd - Sell a March S&P 620 put for $7.25 or better ($362.50 in a mini and $1,812.50 for a full sized contract). Place an order to buy this back at $3. The risk is unlimited and the profit potential is limited to the premium collected. Be careful with this one!
• Our clients were buying these back this afternoon for $3.75 to take a small profit of $175 per contract in the mini and $875 on the big contract. These figures are before commission and fees.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 10th, 2009


Shorts feel the squeeze!


Many analysts have been looking for a short squeeze and it appears to finally be underway. We will know tomorrow whether this is a head fake as we have seen in the past or if the shorts will be forced to exit positions. If the upside momentum continues, our first upside target in the S&P is near 750. Similarly, the Dow could see prices just above 7,200 before the short covering runs dry.

If you have been following this report for a while, you likely remember the late February and early March attempts at a short squeeze in which the bears came out on top. This time may be different...Market pessimism was at or near all time lows and speculators were heavily short. Even in the absence of fundamental support, the bear market bounce could be substantial.

The two catalysts for today's rally was an announcement made by Citigroup stating that they had been profitable in the first two months of 2009 and talk of a reinstatement of the uptick rule. Shares of Citigroup rallied about 35% on the news but it is little solace in comparison to the 80% plunge year to date.

Talk of the uptick rule started with the chairman of the House financial services committee, Barney Frank. However, later in the day Reuters reported that the SEC may be considering re-establishing the rule aimed at slowing the pace of short selling within the next month.

If you took our recommendation to sell puts, you should be out. If not, we strongly suggest that you exit in early trade tomorrow. If you took the long option recommendation, it may be prudent to work an order to liquidate and $15 or better or if the futures market reaches 750.

If you were bold enough to take our aggressive suggestion (dated March 5th) to buy S&P futures near 667, I hope that you were able to liquidate with a handsome profit!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 5th - We recommended to sell the March S&P puts for $7, our clients were advised to sell them for $5 or better intraday as $7 seemed to be a bit optimistic. We recommend buying this back at $1 or better (we may adjust this order as we go).

• March 10 - You should have bought this option back today at a profit.

March 3rd - I like buying the April 800 calls for about $7 in premium.
• March 10 - Place an order to sell these for $15 or better

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.



NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 9 - Buy the mini NASDAQ at 1020 or better.
• Cancel this order, we missed the move.






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 11th, 2009


Shorts cover on dips


Stock index futures started the day on the right foot and ended in the same manner. After yesterday's monster rally, many bears were looking for a repeat of the one-day rally phenomenon. However, aside from a few temporary dips to 712 the March S&P traded in the green the entire session. It was pretty apparent that there were a lot of traders caught on the wrong side of yesterday's rally and on each dip they were scrambling to cover any remaining shorts. Judging by the incredible number of speculative shorts, particularly small speculators, we could have some room to move on the upside as the bears are squeezed.

If you are trading stock index futures, the June contract officially becomes the front month tomorrow. You will begin seeing traders roll into the June contract from March and the liquidity will go with it. The March contract will be tradable through the 19th; however, we recommend that you exclusively trade the June contract by Friday of this week or early next week at the latest. Option traders will be able to easily buy and sell S&P options through the trading session on the 19th but Dow and NASDAQ options which struggle with liquidity will begin to get thin much sooner.

Keep in mind that when it comes to the quarterly options (March, June, September and December) you should never let them go into expiration if the index price is remotely close to the strike price. In the case of the quarterly options, rather than being delivered or made to make delivery of a futures position the option will be subject to a cash settlement. Trust me, you don't want to leave your performance up to the exchanges interpretation of what the value of the index may be as it is determined by what seems to be a relatively arbitrary calculation.
We may have avoided the infamous one-day rally, but I can't rule out a fizzle after two or three days. However, in the meantime the S&P should be able to rally to the 750 mark in the near term. We did see a high of just under 733 in today's session but it "feels" like there is more to go. We have revised our Dow target to 7,150. The NASDAQ on the other hand has outperformed and therefore reached our near-term upside target. We could see just above 1140 but it may struggle from there.


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 5th - We recommended to sell the March S&P puts for $7, our clients were advised to sell them for $5 or better intraday as $7 seemed to be a bit optimistic. We recommend buying this back at $1 or better (we may adjust this order as we go).

• March 10 - You should have bought this option back today at a profit.

March 3rd - I like buying the April 800 calls for about $7 in premium.
• March 10 - Place an order to sell these for $15 or better

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 9 - Buy the mini NASDAQ at 1020 or better.
• Cancel this order, we missed the move.






*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 12th, 2009


Stocks rally on possibility of new bank rules


The Dow posted its biggest three day gain since November but the jury is still out as to whether this is a rally with legs or simply a bear market bounce. The rally was sparked by better than expected retail sales and news that the accounting board may recommend an easing in financial reporting rules of illiquid assets.

GE's credit rating was cut, but it was cut less than what the market had already anticipated. Additionally, GE announced that it will no longer need the $2 billion bailout loan from the government that was previously requested.

In yesterday's newsletter we stated:

We may have avoided the infamous one-day rally, but I can't rule out a fizzle after two or three days. However, in the meantime the S&P should be able to rally to the 750 mark in the near term. We did see a high of just under 733 in today's session but it "feels" like there is more to go. We have revised our Dow target to 7,150. The NASDAQ on the other hand has outperformed and therefore reached our near-term upside target. We could see just above 1140 but it may struggle from there.

Today we are doubting the ability of the rally to hold above major resistance levels ahead of the weekend. We are looking for some back and filling from here. Support in the June S&P should be found near 736 and again near 728. June Dow traders should look for a pullback to 7,035 at minimum or perhaps 6,974. In the NASDAQ, we are looking for a pullback to 1132 in the June contract. However, short covering rallies can be hard to stop and being in front of the bus is miserable. All bearish trades should be taken with caution.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 3rd - I like buying the April 800 calls for about $7 in premium.
• March 10 - Place an order to sell these for $15 or better. You should be out of this by now, if not get out!!

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.



NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 13th, 2009



Stock index futures keep composure


The three-day rally may have lost some if its luster, but it surely didn't fizzle as those in the past have. There was a moderate amount of back and filling in early trade, but buying (or additional short covering) eventually supported the major indices. Many analysts were expecting stocks to succumb to selling pressure late in the day based on the premise that those long the market wouldn't want to hold positions over the weekend. However, it seems that it was those traders short the market that were nervous about holding positions into the weekend.

There is substantial event risk while the markets are closed. G-20 finance officials are meeting in southern England to discuss differences on combating the global recession. U.S. Treasury Secretary Timothy Geithner intends to persuade the European countries to increase spending. However, with the exception of Great Brittain those "across the pond" are fighting for less spending and more regulation.

We were correct in assuming that the markets would pull back a bit following the rally that brought the Dow over 10% from its lows. However, we underestimated the strength a bit. The major indices traded near our support levels, but never quite reached them. Barring any G-20 surprises, this should be a good omen. We believe that as long as the S&P holds 736 on Monday, and the Dow above 7,000 we could get a rally that pushes the S&P above 800 and the Dow near 7,800.

I will be traveling over the weekend and it will prevent me from issuing a newsletter on Monday. Feel free to contact me at your convenience.

Have a great weekend!!


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 3rd - I like buying the April 800 calls for about $7 in premium.
• March 10 - Place an order to sell these for $15 or better. You should be out of this by now, if not get out!!

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 18th, 2009


Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Will stocks turn over soon?


Stock index futures were essentially on hold going into the afternoon Federal Open Market Committee announcement. As mentioned yesterday, this was one of the least anticipated FOMC meetings in recent years due to the lack of flexibility in the current Federal Funds rate. However, traders know that the accompanying commentary has the potential to impact trade far more than the interest rate decision.

The overnight and early morning pullback in the major indices was a necessary evil. Without proper digestion of the rally, the odds of sustaining it are low. Nevertheless, even with the healthy back and fill trade it seems as though the markets will struggle to make significant gains beyond our noted resistance areas and not far away from Wednesday's highs. We are beginning to grow bearish, our clients were advised to buy puts and sell calls into the late afternoon rally (see below). After all, much of the buying has been short covering and the volume has been less than desirable.

Also, it is important to note that March is notorious for early and mid-month strength and late-month weakness. The major indices have suffered significant end-of-quarter draw-downs. However, today and tomorrow are statistically bullish days. Therefore, even if we do get a moderate amount of buying into tomorrow my gut tells me that we will soon be in the midst of a correction.

Friday will be the triple witch and we could see increased levels of volatility but if you trust history the odds seem to favor the upside. According to the Stock Trader's Almanac, the Dow has been up 5 of the last 7 March expirations and the market was up nearly 3% on that day in 2008.
The indices seem to be overstretched here. I see the resistance in the S&P near 806 but believe that even if we do see such levels it will be followed by a move lower to about 734. The Dow nearly reached our 7,572 resistance and we are beginning to reverse our opinion. It seems as though we should get a pull-back to 7,000 at a minimum. The NASDAQ also reached our upside target, we are leaning lower looking for 1132.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 18 - Our clients were recommended to sell the April S&P 870 calls for $7.

March 18 - Our clients were recommended to buy the April 690 puts for $7.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.


There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 19th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Moderate selling, but triple witch...


The surprise announcement by the Fed in regards to the purchase of up to $300 billion in Treasury bonds as well as increase their purchase of mortgage-backed debt securities excited investors today, but I wonder if the euphoria can last. Keep in mind that they did say, "up to $300 billion" and that implies a considerable amount of uncertainty. Also, quantitative easing (the central bank buying its own securities) is the equivalent to printing money and in the long-run there are highly negative consequences to doing so. It seems as though investors had a case of buyer's remorse this morning and we may see a continuation of such in the coming sessions.

Financial stocks lead the market lower but the selling wasn't as swift as many were looking for. It seems as though we may not see the brunt of the selling until after option and futures expiration driven position squaring takes place. Tomorrow is a statistically higher day and it seems as though overnight trade may see some upside ahead of the March stock index futures expiration in the morning. If you are trading March options, you should already be flat. If you are still holding positions that are remotely close to the futures market, I suggest that you attempt to get out in overnight trade. Otherwise your positions will be subject to the contract settlement prices that are sometimes far different from where the futures contract actually goes out.

I still favor the downside at current levels. As mentioned, it seems as though some overnight buying may be in the cards. In fact, I wouldn't be surprised to see a move to or a little below 800 in the S&P but my first resistance is near 787. However, the market seems vulnerable to a pullback that could extend to 734. If I am wrong and the market continues higher before the sellers come back the next resistance is 832.

We are looking for a move back to 7,000 in the Dow, but once again there could be some erratic overnight trade (buying). I see near-term resistance in the Dow near 7,395 and again at 7,473 and these prices may be seen as shorts cover into expiration and option traders re-position. The NASDAQ on the other hand should dip to 1134 within the next week or two.

If you like our support and resistance calls, come trade with us! Our clients are free to "pick our brains" and use our projections for their intra-day trades. This information can be great for traders of all types and strategies.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 18 - Our clients were recommended to sell the April S&P 870 calls for $7.

March 18 - Our clients were recommended to buy the April 690 puts for $7.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 20th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Market chews on week's events


Wall Street had a lot to chew on this week. Aside from key inflation data, we learned that the Fed has dedicated funds to the purchase of its own Treasury securities, Ben Bernanke attempted to shed light on the financial system and the March futures and options expired. Not surprisingly, the week also entailed significant price moves in both directions.

Yesterday we were looking for overnight buying into expiration, and we got it...kind of. I didn't expect the market to sell off before expiration buying took place but it did. Nonetheless, as we thought may be the case pre-open buying was quickly reversed. Leading the market lower were banking stocks partly due to word of American Express' yearly loss and the possibility of a cut dividend. Also weighing the sector was a lack of interest and participation in TALF (Term Asset-Backed Securities Loan Facility).

According to Jim Paulsen, chief investment officer at Wells Capital Management, "TALF got off to a slow start." He added, "Who's going to want to get involved in anything that the public money is involved in, if later on they can say anyone who got (that money) has to do a, b and c now." Mr. Paulsen seems to believe that the failure of TALF is due to the bill passed on Thursday to recoup AIG bonuses.

The fact that the markets didn't completely melt down seems to be a small victory for the bulls. In fact, we may see some moderate buying come Monday and may even retest the recent highs. However, I am sticking with my original assumption that the S&P will soon test support in the low 730's, the Dow near 7,000 and the NASDAQ 1133.


If you like our support and resistance calls, (and aren't already doing so) come trade with us! Our clients are free to "pick our brains" and use our projections for their intra-day trades. This information can be great for traders of all types and strategies.

Have a great weekend!

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 18 - Our clients were recommended to sell the April S&P 870 calls for $7.
• March 20 - We recommended that our clients buy these back at $2. However, some took a profit on Friday and bought them back at $3.20 in premium. We think that we may be able to get in at better prices next week.

March 18 - Our clients were recommended to buy the April 690 puts for $7.
• March 20- Our clients were recommended to sell these at $15. However, some took a profit near $12.75. We think that we may be able to get in at better prices next week.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat





*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[carleygarner]

March 23rd, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Bad bank, good market


Wall Street cheered the government's plan to soak up bad bank assets as the broad market soared 6% on the day. The two-week rally is now running on three-weeks making this the longest running bull market bounce in quite some time. The jury is still out as to whether it will last, and I suspect we will know the answer to the question in the coming days.

The Treasury Department's plan to alleviate banks from bad assets is set to tap into money from the original $700 financial rescue fund. The plan will focus on luring private investment via low interest rates to purchase the toxic securities in which the U.S. government will share in some of the risk. A major positive in the plan seems to be its tendency to involve the private sector and although the government will be insuring speculators willing to purchase the assets, at least they are involved.

We were expecting a possible retest of the highs but I don't think that many could have anticipated such as large rally in a single session. In my opinion, today's rally was primarily forged on short covering thanks to the election of buy stops that have been accumulating for quite some time.

Now that we are here, it seems as though the market is getting toppy once again. However, I do see reasonable potential for the S&P to reach 830 before the short covering/buy stop fury dies down. There is massive criticism aimed at short speculators, but if it weren't for the shorts we likely wouldn't see these types of bear market bounces.

Keep in mind that March seasonal point to a weak close to the month. As good as the markets look now, we could see the opposite phenomenon as April Approaches.

We were recommending that our clients sell the April S&P 890 calls for $6.50 and the order was filled near the close. Some of our clients sold the 885's for $6.00 due to (my) impatience but I still feel as though this is a good trade. We may be looking to buy the April 710 puts for about $6 tomorrow.

I see resistance in the S&P near 825 and again near 832. I suspect that we are near the highs, if I am right we could trade down to support near 790 for starters. I see near term resistance in the Dow at 7,756 and again near 8,040. However, our feeling is that even if the markets are going higher overall (which we doubt) we should at minimum see a minor pullback. Look for 7.450 on the downside.

1260 appears to be heavy resistance for the NASDAQ, our next level will be 1290. Should the market turn-over as we are looking for, we could see a move lower to 1220 in the near-term.

If you like our support and resistance calls, (and aren't already doing so) come trade with us! Our clients are free to "pick our brains" and use our projections for their intra-day trades. This information can be great for traders of all types and strategies.


* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.



S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 23 - Our clients were recommended to sell the April 890 calls for $6.50 or the 885 calls for $6. At the time of this report, it was possible to get slightly better prices. We would like to buy these back within a few days if possible, stay tuned.

March 18 - Our clients were recommended to sell the April S&P 870 calls for $7.
• March 20 - We recommended that our clients buy these back at $2. However, some took a profit on Friday and bought them back at $3.20 in premium. We think that we may be able to get in at better prices next week.

March 18 - Our clients were recommended to buy the April 690 puts for $7.
• March 20- Our clients were recommended to sell these at $15. However, some took a profit near $12.75. We think that we may be able to get in at better prices next week.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

 

[TheBramble]

The Treasury Department's plan to alleviate banks from bad assets is set to tap into money from the original $700 financial rescue fund. The plan will focus on luring private investment via low interest rates to purchase the toxic securities in which the U.S. government will share in some of the risk. A major positive in the plan seems to be its tendency to involve the private sector and although the government will be insuring speculators willing to purchase the assets, at least they are involved.

Carly, do you have any idea precisely what form ‘private investment’ may take, or do the Treasury?

Having already stolen TARP funding from the US taxpayer (and let’s be honest, it’s going to be a LOT more than $Bn700) I presume this isn’t the ‘private investment’ they had in mind? Surely this is just more of the same that got us into this mess in the first place. Private investment, I’m guessing, will be the same companies that received taxpayer dollars already. And then will be further insured by more taxpayer dollars, to buy paper that by its very definition, is never going to come good. The low interest rates which will apparently ‘lure’ them into these deals means the returns to the treasury (and nominally, the US taxpayer – LOL) will be negligible. All it will do, I suspect, is give these already dead men walking the chances to write-off their TARP funds as more off-book debt.

The street ain’t that dumb. With advancers being out-ranked by deliners 4-to-1 there needs to be a clear view to volume to base any short-to-medium term trading decisions and this Groundhog, definitely sees another 6 weeks of Winter.

 

[carleygarner]

Carly, do you have any idea precisely what form ‘private investment’ may take, or do the Treasury?

Having already stolen TARP funding from the US taxpayer (and let’s be honest, it’s going to be a LOT more than $Bn700) I presume this isn’t the ‘private investment’ they had in mind? Surely this is just more of the same that got us into this mess in the first place. Private investment, I’m guessing, will be the same companies that received taxpayer dollars already. And then will be further insured by more taxpayer dollars, to buy paper that by its very definition, is never going to come good. The low interest rates which will apparently ‘lure’ them into these deals means the returns to the treasury (and nominally, the US taxpayer – LOL) will be negligible. All it will do, I suspect, is give these already dead men walking the chances to write-off their TARP funds as more off-book debt.

The street ain’t that dumb. With advancers being out-ranked by deliners 4-to-1 there needs to be a clear view to volume to base any short-to-medium term trading decisions and this Groundhog, definitely sees another 6 weeks of Winter.

Hello. Thanks for your thoughts. I tend to agree with you; it is the taxpayers that are exposed to a brunt of the risk and the private investors that will be enjoying any gains.

It seems as though the market got a little ahead of itself yesterday and I suspect that at some point this week or early into next, investors will realize that the bad bank plan has some serious flaws. The point that I was trying to make was that it is at least somewhat comforting that the government is trying to involve investors outside of the Treasury, Fed, taxpayers, etc.

As far as who these investors are, I am not aware. However, your assumption that it could be the same people that were bailed out the first time...you may be right. It may not be the exact firms but will likely be those with very similar operations. All we can do is hope that some lessons have been learned .

 

[carleygarner]

March 24th, 2009

Thanks to all of you who purchased my book, "Commodity Options", I appreciate your patronage! Don't forget to write a review on Amazon.


Back and fill trade in the indices


Stock index futures spent the trading day digesting yesterday's massive gains (the fifth best day of all time) as well as testimony from Fed chair Bernanke and Treasury sector Tim Geithner in regards to the AIG bonuses. If you happened to have the TV on as the House of Representatives committee questioned the top two U.S. financial officials, I hope that your kids were out of the house. Rational discussion didn't seem to be on the agenda.

The market doesn't appear to be convinced that the new toxic asset bank plan is necessarily a gem, but there is a sense of relief in that some of the uncertainty is removed. However, I am questioning whether newly discovered details of what seems to be a challenged plan will be enough to keep the markets afloat beyond this week. If we haven't seen the highs already, we feel like they will be put in shortly.

I have heard chatter in regards to a suspected continuation of the rally as mutual funds look to "window dress" but that hasn't necessarily been the case. Based on historical standards the end of the first quarter tends to favor significant selling pressure.

On the other hand, earnings season is just around the corner and it is typical for stocks to "run" ahead of first quarter earnings only to sell off on disappointment. Knowing this, it seems reasonable to approach the markets with the assumption that late March selling could create buying opportunities.

We continue to see resistance in the S&P near 825 and again near 832 and expect that the market will fail to hold above (and possibly even reach) such levels, at least for now. The Dow may have a little more room to run on the upside. Aside from resistance near 7,760 there doesn't seem to be any technical barriers until the index reaches 8,035. 1260 appears to be heavy resistance for the NASDAQ, our next level will be 1290.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does.


Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 23 - Our clients were recommended to sell the April 890 calls for $6.50 or the 885 calls for $6. At the time of this report, it was possible to get slightly better prices. We would like to buy these back within a few days if possible, stay tuned.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.


Dow Jones Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.


NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat




*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.



There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.