The Stock Index Report by Carley Garner

March 25th, 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.


Stocks wildly...positive?


After an incredibly volatile trading session the major stock indices edged out moderate gains. The daily range for the S&P was nearly 40 points with the index crossing the pivotal 800 mark on three separate occasions.

Equity market gains were forged on news of better than expected durable goods orders as well as new home sales. Despite what was the case earlier in the year, Geithner and company seemed to have a positive impact on trade leading the S&P near our first resistance area at 825. However, questions over whether or not the current administration will be able to borrow enough money to fund the proposed budget triggered sharp selling after a 5-year note auction failed to lure buying interest.

Based on conversations that I had throughout the day, along with market research, it seems as though the sharp break below 800 in the S&P was primarily sell stop running and the subsequent late day rally was the result of short covering. This theory makes perfect sense. It isn't hard to believe that anyone long the market would be trailing tight stops for fear that the bear market bounce could be near and end. Similarly, those that are or were short the market likely saw the late day dip as an opportunity to cut losses.

It feels as though the intermediate term highs are either in, or will be very soon. Don't forget that March is known for ending the first quarter on a down note. Also, those looking to sell into rallies in the previous couple of sessions were rewarded handsomely. I expect that this will be an invitation for a continuation of such behavior. If my assumptions are correct, aside from a possible uptick tomorrow or early Friday the overall direction could be lower.
While overall we feel as though the current rally should see further digestion we don't want to get "too bearish". As we saw today, the shorts may look at dips as a chance to get even with the market. Therefore, we can't rule out a retest of the recent highs and possibly even a bit higher before the selling resumes.

Look for resistance in the S&P near 825, 832 and 838. The Dow is facing resistance at 7,890 and again near 8,050. If you are a Russell trader, we see a ceiling near 442 with resistance coming in prior to that at 437. 1279 and 1290 are major resistance areas 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 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.
 
March 30th, 2009

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Stocks turn over despite the bandwagon


Just as the last of the timid bulls jumped back onto the bull market bandwagon, the equity markets flipped. Unfortunately, markets have a cruel way of luring in the non-believers and then teaching them a tough lesson. All along we had been calling for a correction and until Friday were standing relatively pat with our convictions.

However, the strong futures market close on Friday enticed us to believe that there were a few more days left in the rally. Accordingly, we recommended that those trading options with us liquidate with small profits, or at least lighten up, in hopes of a better entry this week. Today, we are regretting the decision but are comfortable with the fact that we played it safe and feel as though it is necessary to be cautious in such uncertain market conditions. I have learned that the best indicator in trading isn't an oscillator at all, it is instinct. It isn't always going to be right, but seems to be more useful than any technical indicator that simply tells you where the market has been and not where it is going.

It was a dreadfully slow news day, but things will begin picking up tomorrow. There will be more discussion by the Obama administration regarding General Motors, the S&P/Case-Shiller index on housing (which has been a scrutinized sector) and the Senate Finance Committee will receive a six month update on TARP. Later in the week we will be witnessing a G20 meeting and hearing the details of the latest employment report.

After being given the opportunity to take a step back and re-evaluate the markets, it seems apparent that without a miraculous recovery in tomorrow's session on Washington events the markets should make their way lower. After all, Wall Street isn't happy about the government's new role in the automaker bailout as there are some concerns about the Whitehouse having too much control over business. On the other hand, bankruptcy options may or may not be any more appealing.

The S&P should make its way to intermediate term support near 750. Likewise, 7,180 will likely act as a magnet to the June Dow futures contract. we are looking for the Russell to trade below 400 in the coming sessions with the first major area of support being 392.

* 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 -

Flat

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.
 
April 2nd, 2009

Catch me on Facebook!


New marked to market ruling rocks market!


Stocks enjoyed a jolt of what has been deemed to be positive news for the economy and the financial system, or at least that is the market's interpretation today. Leaders of the G-20 meeting announced that they would be beefing up the International Monetary Fund and government accounting regulations that required banks to value assets on a marked to market basis have been changed. My suspicion is that this rally will exhaust itself within the next few trading sessions as people rethink the circumstances. Nonetheless, it has been fun to watch for those that aren't short. Today's rally brought the broad based S&P nearly 25% off of its twelve year lows last month. Ironically, the index is still in the red by about 7% thus far in 2009.

Until now, G-20 meetings (or even G 6 through 20) were becoming notoriously unproductive. This time around, progress was made and the markets cheered. Only time will tell whether the steps taken were actually productive or counter-productive. The G-20 pledged to give $1 trillion in loans and guarantees to impoverished countries. They also agreed to tighten the noose on tax havens and hedge funds. On the other hand, as expected, views on stimulus package remain widely varied.

For once, my degree in accounting has actually become useful. The independent Financial Accounting Standards Board, known simply as FASB, voted to adopt new guidelines to the controversial marked to market accounting rules. Opponents of the plan suggest that the new higher valuations will drive away private investors to work against the governments new financial rescue program.

Beginning this quarter, banks will be allowed to value assets based on the assumption of an "orderly" sale rather than a "distressed" sale. In that case, I would like to account for my house at a value based on what I would receive in "better market conditions" when figuring my net worth on credit applications. The one thing that I learned about accounting while in school is that there are many shades of gray and nothing is what it seems. This may be a step in the right direction for now but it will take a lot more than changing a few arbitrary numbers on a balance sheet to "fix" our financial markets. I am wondering if the euphoria can last much beyond this week.

We see resistance in the S&P near 855 and again at 864 and believe that there is a chance that we will see the mid-860's tomorrow following the employment data. On the other hand, we are wondering if profit taking will come into play as the day progresses. In fact, our clients are working orders to sell call options against an early rally tomorrow. We like the April 910's but will see how things look in the morning.

If you are trading the Dow, we see resistance at 8,160 and again at 8,230. NASDAQ resistance can be found near 1326 and distantly at 1363. We have recently begun commenting on the Russell, and encourage your feedback. Meanwhile, we see near-term resistance at 463 and again at 473.

**We apologize, due to time constraints this report has not been posted regularly to outside websites. However, keep in mind that subscribers receive the reports in more timly fashion. If you found yourself waiting for this newsletter, perhaps you should consider registering for our newsletter on either of our websites.


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 -

Flat

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.
 
April 3rd, 2009

Catch me on Facebook!


Non-farm = Non-event


All of the hype and anticipation that led up to this morning's employment report quickly dissipated as traders discovered that the numbers were in line with expectations. Although whisper numbers were calling for job losses in excess of 800,000 the actual number was reported at 663,000. I don't think that anyone could spin this into a positive indication for the economy, but it is fair to say that it could have been worse.

Accordingly, the market's reaction was overall bearish but with very little conviction. In my view, given the weak numbers and what many consider to be overbought technical conditions Friday was a victory for the bulls. If my instincts serve me well, we could see a continuation of the rally early into next week.

We were expecting to see some more buying in today's session and are a little suspicious of the markets given Friday's intraday high in the S&P was at or near trend line resistance. Even so, we stand by our assumption that we will see higher prices in the near term. Our resistance in the S&P stands at 885, 864 and again at 872 (which we don't necessarily expect).

If you are trading the Dow, we see resistance at 8,160 and again at 8,230. NASDAQ resistance can be found near 1336 and distantly at 1363. New resistance in the Russell 2000 should be found at 467 and again at 473.

Sorry so short, have a nice 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 -

Flat

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-Russell 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 -

April 3 - Sell the mini-NASDAQ at 1337 or better.





*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.
 
April 6th, 2009

Catch me on Facebook!


Profit taking ahead of earnings


We have been noting April's tendency for a strong beginning and weak middle, and the seasonality seems to be holding true. In fact, based on today's trade it looks as though the rally has been put on hold for now. We were expecting a strong overnight showing in the major indices, and we were correct. However, we were wrong as to the magnitude of the move. While we were looking for 855 to 865 in the S&P, the market may have quietly topped out at 848.

The selling commenced after a prominent analyst predicted more bank losses and questioned the governments bailout plan. The same analyst, Michael Mayo, issued "sell" ratings on several financials and went on to say that the loan losses could exceed levels seen in the Great Depression. Adding to turmoil in the sector, Treasury Secretary Timothy Geithner warned that the government could force out bank CEO's similar to the action the Fed took against GM(Government Motors)'s Rick Wagoner.

The market is currently in the center of our support and resistance areas making a prediction of direction somewhat difficult. Nonetheless, my instinct tells me that the markets may have turned the corner and we should expect the June S&P futures contract to make its way lower to the 780 area. With that said, 832 looks to be extremely pivotal in determining whether the markets move higher or lower from here. Once again, we are favoring the downside for now as earnings season may have a difficult time meeting the market's expectations. If I am wrong, look for resistance at 836 then again near 855.

Similarly, 8,000 in the Dow may be considered the make or break point. For now, it seems as though the odds favor a move lower to just under 7,500 but a close over 8,000 may prove us wrong. In the case of the NASDAQ, we feel as though a slide to 1220 or maybe 1206 is in the works. Likewise, the path of least resistance in the Russell seems lower and could bring the market to 411.

* 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 -

Flat

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


There are no Russell recommendations
NASDAQ Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

April 3 - Sell the mini-NASDAQ at 1337 or better.




*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.
 
April 8th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.

Technical bounce in light volume

It was a roller coaster session for the major stock indices. Sharply lower overnight trading turned into a respectable rally by mid-day trade. However, the buying proved to be fickle and dried up quickly after the FOMC minutes were released. Nonetheless, light volume seemed to favor the upside as the markets rallied going into the close.

According to the Fed minutes of the most recent FOMC meeting, the economic outlook for the rest of the year has been lowered and the nations GDP is expected to flatten out in 2009 and may slowly expand in 2010. While most television pundits are screaming inflation, some Fed members are voicing concerns of deflation.

Meanwhile, the SEC is considering several tactics aimed at restricting short selling with reinstatement of the uptick rule on the top of the list. I realize that I am a biased opinion, but I can't figure out why speculators don't forget about equity trading and make their way to the futures markets. Futures traders are free to buy or sell the stock indices freely without the worries of borrowing shares or paying interest. Likewise, there are single stock futures which have yet to gain ground in terms of liquidity but in theory could be a much more efficient way to participate in stock speculation. Additionally, the tax consequences faced by futures traders is favorable and so is the convenience. As opposed to a line by line profit and loss record, futures traders claim a lump sum figure on their taxes.

I will admit, I was expecting a move a little lower than 800 in the S&P before a bounce could occur but the overnight low of 802.25 looks to have satisfied the market. Despite bearish fundamentals and seasonals, today's close and the chart, is telling me that light volume and holiday trade may temporarily favor the bulls. I think that 855ish is possible by early next week or maybe even on Friday while nobody is watching. With that said, lightly traded markets are often better off being left alone...anything can happen tomorrow as traders square ahead of Good Friday.

If I am right about the S&P, the Dow could be in store for a move higher to 8,100, the NASDAQ to 1335 and the Russell to 461.

* 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 -

Flat

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 -

April 3 - Sell the mini-NASDAQ at 1337 or better.




*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.
 
April 9th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Positive earnings trigger short squeeze


Stock market bulls will likely have more than just a "Good Friday"; however, the bears may have a rough holiday weekend. My clients were advised to sell S&P call options into the late day rally, so I will be biting my nails going into the Sunday afternoon open. The original recommendation was to sell at $8 in premium, but depending on some discretion of the client fills ranged from $7 to $7.75.

Light volume and a surprisingly positive earnings report from banking giant Wells Fargo triggered a massive short covering rally to post the fifth consecutive week of gains for the major indices.

More so than the fact that a bank has managed to post a profit (with lots of help), the likely culprit to the massive buying was short covering in financial stocks. Believe it or not, coming into today there were reported to be very large speculative short positions in bank equity securities. I am not saying that the banking sector is healthy, but in my opinion it doesn't make sense to sell short a stock that is valued under $5. After all, the profit potential is limited (occurring if the share price goes to zero) but the risk is theoretically unlimited. I am not a stock broker, or even a stock trader but it seem as though there are better ways to make money. I will admit that option selling faces the same obstacle, but I believe that option sellers will normally experience far less volatility in their bottom line.

While I respect the possibility of some overflow buying early next week, I also believe that the buying will dry up. Don't forget that stocks tend to sag just before the April 16th tax deadline as investors liquidate assets for cash. If the Euphoria continues, the S&P has room to move to 867 or even the February highs just above 870 but at some point in the near future I think that we will see 800.

I wouldn't be surprised to see 8,100 or even the 8,160 (the same area that we have been touting for weeks) early next week, but expect an eventual rollover that could bring the Dow back to 7,630.

If you took the NASDAQ recommendation below, we see resistance near 1347 but still feel comfortable with the downside. If you are nervous, you may want to buy an April 1350 call for insurance, they are running at about $375.

Have a nice Holiday!

* 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 -

Flat

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 -

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.






*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.
 
April 13th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Follow through buying, but toppy market?


After some early morning consolidation, equities made their way higher on paper thin volume. Apparently, traders saw the light news week as an opportunity to take an extended holiday (nobody bother to let me know, I showed up this morning).

Much of the late session buying is being associated with optimism ahead of the upcoming earnings figures released by financial firms. Goldman Sachs was scheduled to report quarterly earnings first thing but they made a surprise announcement Monday afternoon following the bell. The firm beat street estimates to the tune of 100%. However, aftermarket trade in the shares suggested that traders still weren't impressed. Stock index futures also failed to budge on the news. JP Morgan Chase will announce before the open of trade (cash market) on Thursday and Citigroup on Friday. The near-term fate of the market may be in the hands of these few firms.

According to sources, April option expiration stats suggest an upward bias. For instance, the Tuesday prior has been up 15 of the last 20, Wednesday up 11 of the last 20, Thursday up 8 of the last 20 and Friday up 12 of the last 20. On the contrary, the Monday following expiration has been down 14 of the last 20 occurrences.

At the end of last week, we noted that the S&P could move up to 867/870 area before turning over and this continues to be the case. While I think that we are getting somewhat toppy in the near-term, it feels as though light volume, short squeezing and stop running wants to take the indices a little higher before the buying dries up. Beyond 867, I see resistance near 875 but prefer the short side of this market. Don't forget about the pre-tax deadline selling.!!

The June Russell has reached its February highs and may be due for a pullback. Nonetheless, light volume may favor the running of stops just above the current high. This is the index that has lead the market higher and must be the one to lead it lower. If we are right, we could see a correction to about 439.

If you took the NASDAQ recommendation below, we see resistance near 1360 but still feel comfortable with the downside overall. With that said, we hope that you took our suggestion to buy the April 1350 call for about $375. If not, you may want to tomorrow for a peace of mind play.

* 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 -

Flat



Russell 2000 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 -

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.
• On April 9 we recommended to buy an April 1350 call against this position for about $375.





*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.
 
April 15th, 2009


If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


A "less bad" economy, quiet stocks


According to the Fed, the economy is contracting at a slower pace than has been the case. They also noted "Retail spending remains sluggish although some districts noted a slight improvement in sales compared with the previous reporting period." Some interpreted this to be a positive sign, but the bottom line is that it is still contracting.

On a dimmer note, the Treasury Department claimed that its latest monthly survey of lending activity showed increases in 9 of the nations' largest banks but 12 declines. Specifically, mortgage lending rose 35.4% and equity lines of credit increased by 17.7%; conversely, commercial and industrial loans plunged 47%.

We are still favoring the short side of the market but realize that it doesn't pay to be "too bearish" given the circumstances. There is a considerable amount of event risk surrounding the release of financial company earnings. Additionally, option expiration on Friday is a wildcard that makes speculation even more difficult than usual. If you are a bear with open profits I would suggest playing it safe by lightening up, hedging or simply locking in a profit.

With that said, we still feel as though the path of least resistance is lower. We are anticipating about 816 in the S&P before buyers come back to the market. Our revised target in the NASDAQ is 1270 and we are looking for 435 in the Russell. The Dow chart looks much more positive than the others, major support comes in at 7,730.

Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296. Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees. If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.


* 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 -

Flat

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 -

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.
• On April 9 we recommended to buy an April 1350 call against this position for about $375.
• April 14 - You may have opted to take a profit on this position on today's dip, if not look to buy it back near 1275.
• April 15 - Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296. Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees. If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.




*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.
 
April 16th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Equities leaning higher ahead of Citi


Better than expected earnings from JP Morgan Chase kept financial stock bears in check but the announcement of Citigroup earnings will undoubtedly have an impact. In the meantime, the April options will expire tomorrow and the impact of position squaring could be part of what has kept the rally intact. I wouldn't be surprised to hear that there are a significant number of short call traders buying futures to hedge positions in the final day.

Traders are noting light volume as the market rallies and the opposite on the way down. This may be a sign that much of the buying is short covering and buy stops as opposed to fresh longs getting in. Don't forget that this rally was made possible by a short squeeze and therefore the remaining shorts are looking to offset positions on dips. If that is the cause of yesterday's reversal as I suspect, we could see some follow through buying to 870 in the S&P. If you recall, on Monday we noted the possibility of 867/870.

Economic guidance was mixed on the day. According to the Labor Department, unemployment claims dropped to a seasonally adjusted 610,000 but it was a bittersweet victory as the number of people receiving jobless benefits exceeded 6 million for the first time ever. The Philly Fed index was reported to be better than expected at a negative 24.4 but housing starts were weaker than expected and the IMF's semiannual economic outlook painted a bleak picture.

We were right to be cautious coming into today. I hope that you were able to take our advice regarding any bearish positions. If you are following or participating in the NASDAQ recommendation below, I hope that you were able to liquidate the remaining long call position today. If not, look to do so early tomorrow.
The market may be setting up for an exhaustion of the rally with 872 being significant resistance in the S&P, 8,210 in the Dow, 1370 in the NASDAQ and 478 in the Russell. At or near these levels we become bearish once again.

* 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 -

Flat

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 -

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.
• On April 9 we recommended to buy an April 1350 call against this position for about $375.
• April 14 - You may have opted to take a profit on this position on today's dip, if not look to buy it back near 1275.
• April 15 - Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296. Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees. If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.
• April 16 - I hope that you were able to liquidate the remaining long call position today. If not, look to do so early tomorrow.





*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.
 
April 20th, 2009

If you like this newsletter, you will love my book "Commodity Options"! Now available at any major book outlet.


Financials break the market


The same sector that allowed the market to rally nearly 30% in six glorious weeks drove broad based indices lower in Monday's session. Despite better than expected earnings from Bank of America, the firm noted that it had set aside $13.4 billion to cover potential defaults. Other big banks have also had upward revisions to the cash that they are setting aside to cover loans that may eventually become write-offs.

Despite the convenient news stories that are said to have brought the markets down, we argue that perhaps it was option expiration and artificial buying as short call traders hedged holdings that buoyed the market last week. In effect, without the option expiration blanket of security it was like the rug was ripped from underneath equities.

On Thursday we had predicted a last gasp rally in the S&P to 872 and on Friday we got it. In Friday's newsletter we noted that we thought that the highs were in and pointed out that the S&P could "trade back to the 820's before we know it" and here it is. Going forward, things are a little less certain. We see critical support at or near 828; how the index handles itself at such levels will determine the market's direction for the coming weeks. Given the magnitude of the drop, the market seems prime for what will likely turn out to be a temporary bounce. Nonetheless, we feel as though the rally has ended for now. Should our analysis be correct, following a move higher that faces resistance at 851 we are looking for a continuation of the sell-off to bring the index to the mid 780's.

The Dow on the other hand has traded below critical support near 7,830. Once again, this index is vulnerable to a dead cat bounce but it seems to me as though there is potential for the Dow to trade closer to 7,500 in the coming week or two.

Critical resistance in the Russell lies at 443, and such levels will most likely be seen by mid-week.

If you participated in the short S&P 940 call recommendation, our clients were recommended to liquidate this position today for $2.75 or better (most took $2.85). If you are still holding this position, I suggest that you lock in your 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 -

April 9 - We recommended to sell the April 940 calls for $8, but were getting filled between $7 and $7.75.
• April 15 - We recommended that our clients with multiple positions lighten up by taking small profits with the intent of reselling them for better prices.
• April 20 - Clients were recommended to take profits near $2.75, most fills were near $2.85.


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


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

Position Trade -

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.
• On April 9 we recommended to buy an April 1350 call against this position for about $375.
• April 14 - You may have opted to take a profit on this position on today's dip, if not look to buy it back near 1275.
• April 15 - Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296. Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees. If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.
• April 16 - I hope that you were able to liquidate the remaining long call position today. If not, look to do so early tomorrow.





*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.
 
April 28th, 2009


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Awaiting the Fed


Again, stocks managed to pick themselves from up what seemed to be a desperate overnight session. Slightly positive data and news that IBM will be raising its dividend by 10% offered the market some hope that the economy has turned the corner.

All eyes are on the Federal Open Market Committee and the looming interest rate decision. It is widely expected for the Fed to do nothing in terms of adjusting the Federal Funds rate as there is nowhere else for it to go but higher...and they don't see ready to pull that trigger. However, as is always the case, traders will be focused on clues into future moves by the central bank. Last month, the Fed dropped the quantitative easing bombshell on the bond market. Who knows what could be in store for the financial markets tomorrow.

In light of the event risk, it seems wise to be sidelined ahead of the day's activities. There are often trading opportunities in post FOMC market conditions but being in the wrong place at the wrong time prior to the announcement can be devastating.

We would like to be able to sell calls against a swift rally in the S&P to the 830 area and puts beneath the 800. Obviously it would take a large move for either of these objectives to be met, but it isn't out of the question.

Given that the market hasn't made any notable moves, we still believe in the support and resistance figures reported yesterday:

Resistance in the S&P can be found near 868/872 area with the next potential ceiling looming at 881. Should the index see 881, we would turn highly bearish and look to construct an appropriate strategy. In the meantime, significant support lies at 837, 830 and then again at 793.

Dow traders should look for resistance near 8,200 and support at 7,885 and 7,600. We have a hard time believing that the NASDAQ will be able to penetrate 1400 and see support near 1314 and again at 1232.


* 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 -

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.
 
April 30th, 2009

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Mutual fund buying dries up


Traders claim that sidelined cash has been put to work in recent trading sessions but note that mutual fund buying seemed to taper mid-session. In yesterday's newsletter we mentioned that the market was statistically bullish on Thursday and Friday of this week. While the market failed to hold gains, it seems as though the stats didn't lie.

Economic news was mixed to slightly negative but the market persevered. Consumer spending was reported to be slightly lower than expected but weekly jobless claims showed stabilization in the employment sector. The biggest story weighing on the market was the unsurprising announcement of Chrysler filing for Chapter 11 bankruptcy.

We are a little uneasy about the near term direction as the daily charts are suggesting that the highs may be in but the light volatility, tight trading range and weekly chart are all giving hints of a move up to 940. Once again, we would like to be bearish, but our strategy of choice (selling calls) doesn't seem to be panning out. This morning we could have received nearly $5 in premium for the 940's but at the time the futures were trading in the 880's and didn't seem to be enough room for error for such a small amount collected. 60 points may seem like a lot of breathing room, but in a market that is being driven by short covering and with little technical resistance above 900 this trade could have been compared to picking up pennies ahead of a steamroller. Hopefully, we will get a better opportunity.

In the meantime, we opted to go with a trade that is similar to watching paint dry...but may be good for a small profit. The Eurodollar has been somewhat correlated to the stock indices in recent months, accordingly we recommended that our clients go short the June Eurodollar as a way to indirectly play the equity markets with light margin and risk. Besides, the Eurodollar looks to be a bit overbought and short-term yields are low.

The S&P reached our upside resistance at 887 and backed off sharply...but tomorrow is slated to be a positive day. We could get a retest of today's highs and maybe the mid 90's as mutual funds pour cash into the markets. However, selling a sharp rally (if it happens) could be a good day trade.

In yesterday's newsletter, we also noted 500 as psychological resistance for the June Russell. However, we still maintain that 520 is possible in the near future. Our target of 1400 in the NASDAQ was surpassed and perhaps has seen the highs, but if we are right about the other indices the NASAQ should also make its way slightly higher in early trade tomorrow.

* 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 -

Flat



Russell 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.
 
May 1st, 2009


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Statistically positive, but actual upside marginal


Based on historical statistics, today was slated to be a positive day. However, after posting the best month in nine years, the major indices took the opportunity to take a breather by spending much of the session waffling near unchanged. Long-term investors are likely anchored on the fence between missing the next up-move and taking profits from what has been an incredible run.

Consumer confidence figures beat expectations and shifted early morning pessimism into optimism. Economists are looking for the consumer to pull the economy out of its rut, and consumer sentiment is the stepping-stone.

As much as I would like to confidently disclose our stance in the market, there are simply too many mixed signals to sift through. I still feel as though we could easily see 930/940 in the S&P in the coming month or so should the economic data continue to be optimistic. However, action on a daily chart is suggests a possible retest of the 850 area. With that said, even if the market is going to 940 selling into sharp rallies has worked nicely on the way up and could still be the way to go in the coming days. However, it is imperative that bears patiently wait for great intra-day opportunities. There is little room for error in this market and "forced" trades have been painful lessons for many shorts in this market.

We see resistance in the S&P near 887 and again at 902, daily support lies at 849. Dow traders should look for resistance near Thursday's highs (8,277) and then again near 8,400. 500 continues to hold the Russell in check, but we see 520 as a possibility. 1400 in the NASDAQ remains critical, but it feels like the tech sector wants to go higher. If so, the next major resistance area is 1495...this should be interesting.
My weekend will be spent dealing with a broken main water line, hope yours is better than mine!!

* 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 -

Flat

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.
 
May 4th, 2009

Register for our "Talk to Series" option trading webinar hosted by the New York Institute of Finance and presented by DeCarley Trading! Visit our websites for details.


Better data, better market


After being described as a patient in critical condition for much of the first quarter of 2009, the U.S. economy is showing glimmers of a recovery. Futures were trading mixed to slightly higher in early morning trade, but a better than expected home sales number sparked a large rally in equities.

Pending U.S. home sales posted their second monthly gain and beat market expectations. According to the National Associate of Realtors, the index of pending sales for previously occupied homes rose 3.2% to 84.6. On the same note, the Commerce Department reported that construction spending rose .3%. This was the best reading since September of last year, despite analyst forecasts for a negative number.

According to historical statistics, Tuesday is neutral but Wednesday and Thursday are both bearish days. We still believe that the June S&P could see 940, but wonder if a temporary pullback won't be seen going into this Thursday's bank stress results and Friday's employment data. After all, 900 should present significant psychological resistance.

Keep in mind that much of this rally has been at the hand of financial stocks. Therefore the results of the bank stress tests could make or break the broad market in the near-term. With that said, the stock reversal was founded on arbitrary comments made by a banking executive suggesting that the industry could actually be profitable despite the challenging environment. Perhaps the market has already priced in a potentially optimistic view of the bank tests. Accordingly, even if we do see a post stress-test rally it could give way to selling pressure shortly after.


This afternoon we were recommending that our clients sell calls against the S&P. We were selling the June 990 calls for about $7.25 in premium. Normally we like to sell options in the front month, but there simply wasn't enough premium based on our possible scenario of a move to 940. Although we think that such a move will be post-correction, it didn't seem wise to push our luck. Ideally, we will get a chance to buy this position back on a dip (at a profit) and re-sell it if the market does rally to our target.

Word has it that there are several stops above 902, therefore near-term resistance should be found near 905ish and again near 920. On the downside, we have support at 885 and 870 with a possible correction to 855 later this week.

On Friday we pointed out Dow resistance near 8,400 and today's high wasn't too far away. However, the next ceiling should be found near 8,440. We think a temporary pullback is looming which could extend to just above 7,800. We still see the next major resistance area on the NASDAQ near 1495 but if you are bullish this market you should tighten stops, as a sizeable pullback (1350) seems necessary. Additionally, we feel as though the June Russell futures could see 520 but overbought conditions leave the risk to the downside.


* 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 -

Flat


Russell 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.
 
May 5th, 2009

Register for our "Talk to Series" option trading webinar hosted by the New York Institute of Finance and presented by DeCarley Trading! Visit our websites for details.


Bernanke optimism deters bears


Stock market bears seemed to be reluctant to sell into overbought market conditions and Federal Reserve Chairman, Ben Bernanke, may have been the glue holding the rally together. Bernanke told congress that the economy should begin growing again later this year. This is the brightest forecast provided by the Fed Chair since last year.

On the other hand, Bernanke also reminded listeners that the growth will be subpar and we could see a continuation of sizable job losses. Also preventing what could have been a more significant pullback of the broad market, the Institute for Supply Management reported that the economy is contracting at a slower pace. Their index of non-manufacturing activity was reported at 43.7, nearly 2 points better than the previous month's.

Later in the day, Goldman Sachs announced that they have changed the rating of Bank of America to "outperform". They also noted that U.S. banks are "attractive". In theory this is good news for the market; after all, it was the financial sector that lead equities higher. However, we can't help but believe that much of the near-term buying was expended before the announcement and that the flurry of short covering yesterday essentially built in this type of news.

In yesterday's newsletter we mentioned that Tuesday was a statistically neutral day and that is exactly what we saw. Conversely, based on historical data the odds are favoring the downside in the next two sessions. We are leaning very cautiously lower, but can't rule out one last push higher. Resistance in the S&P lies at 911 and again near 920.

As far as the other markets go, we are sticking to our original numbers:

On Friday we pointed out Dow resistance near 8,400 and today's high wasn't too far away. However, the next ceiling should be found near 8,440. We think a temporary pullback is looming which could extend to just above 7,800. We still see the next major resistance area on the NASDAQ near 1495 but if you are bullish this market you should tighten stops, as a sizeable pullback (1350) seems necessary. Additionally, we feel as though the June Russell futures could see 520 but overbought conditions leave the risk to the downside.


* 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 -

Flat

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.
 
May 6th, 2009

Register for our "Talk to Series" option trading webinar hosted by the New York Institute of Finance and presented by DeCarley Trading! Visit our websites for details.


Stress test leaks relieve tension


Equities reacted positively to ADP's prediction of Friday's government employment report but it was leaking of the stress test results that kept the rally intact. The early flow of banking information wasn't necessarily bullish but it was enough to relieve much of the tension going into tomorrow and likely enticed some short covering.

In yesterday's newsletter we mentioned that we couldn't rule out one last push higher, and today's rally may have been it. 920 marks considerable resistance in the S&P, but above that we could easily see 940 if the circumstances regarding the stress tests and employment report are right. As of now, we aren't expecting 940 but simply acknowledging that it could happen. Therefore, any position or day-trading venture should be considerate of this possibility in the coming days.

We are still favoring the theory of a market correction at some point going into the weekend. It seems as though the news events may be treated in a buy the rumor sell the fact manner as the current rally has likely stemmed from the possibility of positive news. Don't forget that the markets are forward looking and if investors start to feel as though all of the good news is out they will begin taking profits.

The market are looking toppy, but that doesn't mean that they can't creep higher before reversing. A weekly chart of the Dow suggests that 8,900 is an eventual possibility but for now we think that 8,500 will pose problems for the market. Similarly, the S&P could see 940 but the odds seem to favor a near-term pullback before reaching the objective. Keep an eye on the Russell, it must hold below (close below) 520 to halt the rally.

If you are long futures, you should be tightening stops. If you are trading options, buying puts and/or selling calls is the way to go. With that said, bears must be willing to ride out the potential move to 940.

For a limited risk play, we like buying the May 875 put for about $6.

If you are interested in learning more about these types of trading strategies, join us on May 7th at 4:30 pm for a free online educational webinar. Register at New York Institute of Finance: Financial Training

* 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 -

Flat




Russell 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.
 
May 11th, 2009


If you missed our online option trading class with the New York Institute of Finance (I know most of you had scheduling conflicts), you can view the archive for free by visiting our website.


Stock index futures take a breather


It was an overall red day on Wall Street, but the selling pressure wasn't as swift as many had anticipated. The markets had several opportunities to take out critical support levels but it just wasn't meant to be. Perhaps there is too much pessimism in regards to the recent rally and, quite frankly too many bears. If this is the case, we could continue to see short covering on dips. That said, while another run to our major resistance levels (940 in the S&P and 8,950 in the Dow) is entirely possible we believe that the major indices have become a bit "toppy" and should see a sizable correction at some point. Unfortunately, without the help of a crystal ball it is difficult to determine the timing of it all.



Accordingly, we feel as though bears should play it conservatively. Being too early and overleveraged in this market has the potential to end a trading career. This is what they call a trader's market; those looking to sell futures should patiently wait for favorable intraday levels and be willing to offset trades to lock in profits should the opportunity arise. Option traders should do the same as long option traders may struggle to overcome premium erosion and short option traders are subject to explosions in volatility at all times in which there are open positions. It is better to be safe than sorry.



In Friday's newsletter, we noted our expectations for a pullback in the near-term but also pointed out that the eventual target may be 9,000 in the Dow and 940 in the S&P. Monday's action proved to be in line with our analysis but we are left wondering whether the correction has run its course or will we get another day or two of back and filling. We see major support near 875 in the "Spoos" and 8,150 in the Dow.



**Our newsletters have attracted droves of followers and we appreciate the interest in our products. However, in an attempt to reduce the amount of piracy and plagiarism we will not be posting The Stock Index Report as consistently as we have in the past. We urge you to register for a FREE e-subscription to the newsletter by visiting our website. The Stock Index Report subscribers will conveniently receive the newsletter each day by email in a timely fashion and on a complimentary basis. We appreciate your understanding and look forward to providing you with market commentary.



* 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 -



Flat







Russell 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.
 
May 13th, 2009

If you missed our online option trading class with the New York Institute of Finance (I know most of you had scheduling conflicts), you can view the archive for free by visiting our website.


Critical crossroads


The retail sales headline cracked the market in early trade and things only got worse. A market that seemed unstoppable a week ago has finally retreated to what we deem to be critical support levels. In other words...what the market does from here could make or break the rally.

According to the U.S. Census Bureau, retail sales declined in April by .4%. This marks 8 out of 10 of the last readings in negative territory and rightfully pulled some of the euphoria out of retail stocks. It is no surprise that the consumer has tightened wallets in light of plummeting stock and housing prices.

In yesterday's newsletter, we were calling for "a continuation of the dip to the sub 880 area; perhaps 875ish". We also mentioned that, "following this digestive correction, another large rally could be brewing." For now we will stick to this assumption and look for the market to potentially make a run at the recent highs...but as usual, things change quickly so we will attempt to be nimble.

While our technical analysis in the S&P suggests that at minimum we could see a temporary bounce from support levels, the two leading indices have broken support and point toward continued weakness. For this reason, if you do have bullish S&P positions on you should be willing to take a quick profit to reduce risk of the NASDAQ and the Russell pulling the market lower. The next significant support in the Russell isn't until we get close to 450, similarly the next notable floor in the NASDAQ could be near 1300. Like the S&P, the Dow hasn't broken significant support, which is now looming near 8,160.

If you were following our recommendation regarding the short June S&P 990 calls from the May 4th newsletter, our clients were recommended to liquidate near $3 this afternoon to lock in a profit. Assuming fills at $7.25 and $3 it is a profit of $212.50 per contract on an e-mini and a little over $1,000 on a large. These figures are before commissions and fees of course. Don't forget that option selling involves the same unlimited risk faced by futures traders. If you are interested in an option selling approach to the markets, pick up a copy of my book "Commodity Options". It is currently available at all major book outlets.

*Our newsletters have attracted droves of followers and we appreciate the interest in our products. However, in an attempt to reduce the amount of piracy and plagiarism we will not be posting The Stock Index Report as consistently as we have in the past. We urge you to register for a FREE e-subscription to the newsletter by visiting our website. The Stock Index Report subscribers will conveniently receive the newsletter each day by email in a timely fashion and on a complimentary basis. We appreciate your understanding and look forward to providing you with market commentary.


Sorry so short!!




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 -

May 4th - Our clients were recommended to sell the June 990 calls for $7.25 or better.
• May 13th - Our clients were recommended to take a profit by buying back this option near $3.



Russell 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.
 
May 18th, 2009


Stocks up post-expiration


Investor optimism was renewed by better than expected housing data, impressive earnings from Lowe's and positive analyst comments in regards to the banking sector. According to Richard Bove of Rockdale Securities, the potential for "explosive earnings growth and unusually strong stock price performance" exists in the banking sector. Additionally, Goldman Sachs has raised its rating on Bank of America to a "buy".

According to data released throughout the day, homebuilder confidence has ticked higher and so has building permits and housing starts. While it is too early to call any type of bottom in real estate, it does appear as though there are signs of stabilization.

Last week's trade closed on a sour note, but it is now clear that option expiration may have played a role in equity weakness. We have been calling for a sharp rebound from last week's correction but I will admit that I didn't quite think that it would happen so fast...and with such a lack of back and filling. Today's session was highly one sided; most likely due to the fact that shorts were covering on all small dips which prevented "normal" digestive declines. The light volume leaves the rally somewhat suspect, and leaves me thinking that an overnight pullback in stock index futures is likely.

We are sticking to our previous call in the S&P:



Our major support area in the S&P near 877ish has managed to hold, as we have mentioned in previous newsletters; if this continues to be the case we could see a rally in the S&P to retest the recent highs and may be even reach the 940 area, 950 being our distant possibility. If we are wrong about the market's direction from here, a clear break and hold below 873 or so could lead to a much larger move to 820.

Last week we mentioned that the June NASDAQ will need to trade above resistance near 1374 in order for the rally to resume. It now looks like that is the case. Our next upside target is 1440. We noted that traders should be looking to buy the Dow on dips, with major support at 8,190 and this would have turned out to be a great place to be long. A pullback to 8,300 isn't out of the question but we are looking for a move to 8,640. We have mentioned that the Russell needed to break through resistance near 483 to make progress on the upside and now appears to be headed toward the 515/520 area.





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

Position Trade -

Flat


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


Position Trade -

Flat




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.
 
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