carleygarner
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February 25, 2011
Visit DeCarley Trading website to register for DeCarley's next webinar, Getting Started in Option Selling part II!
New 2011 highs for stock index futures?
The stock market has made an art out of "blink and you miss it" corrections. Although we had originally thought the dip would extend into the mid-to-high 1270's in the S&P, we've now come to the conclusion that the low 1290's could have been "it". From here it seems the stock indices are poised to make new 2011 highs.
As mentioned in yesterday's newsletter, the equity markets are being held hostage by the Middle East and more specifically, crude oil.
Excerpt from recent newsletters (just in case you missed it):
Trade in the stock index futures will be highly dependent on events in the Middle East and their effects on crude oil. As dramatic as the crude rally has been, the market seems to be pricing in a lot of "what if's" rather than reality. This doesn't mean further deterioration of the situation can't occur, but it implies that the market is bracing for the worst and could be vulnerable to disappointment. Keep in mind that Libya produced approximately 1.7 million barrels of crude per day, and so far production has declined to about 700,000 barrels. However, the U.S. imported only about 51,000 barrels per day from Libya and this accounts for less than 1% of total crude imports. Also, the International Energy Agency and Saudi Arabia have pledged to cover any shortfall in supply resulting from ceased operations in Libya. In other words, don't get caught in the hype just yet...
It appears as though oil prices "might" have seen a key reversal; if so, the equity markets may be finding support sooner than many had thought. In stark contrast to the ideal held by traders in much of 2010 in which it is believed that higher oil, meant higher oil stocks and therefore higher stock indices; traders are now assuming higher energy prices will choke the recovery. In other words, the correlation has gone from positive to negative and a pullback in crude oil could trigger "bargain" hunting in equities.
There are other analysts with this view; according to Jim McDonald of Northern Trust in Chicago, "If we see oil prices normalize back down to where they were at the end of the year because of increased stability in the Middle east, that would be constructive to global growth and investors would love that."
Monday's tend to be bullish days for the equity markets, and we doubt that the upcoming session will be any different. Despite a temporary scare, we think the bulls will be reloading (assuming a lack of event risk over the weekend and stable crude oil prices). If we are right, the S&P could see prices as high as 1350 in the coming week or so. Similarly, the Russell could see 844 and the NASDAQ 2423.
* 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. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already factored into current prices, any references to such does not indicate future market action.
Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
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.
Visit DeCarley Trading website to register for DeCarley's next webinar, Getting Started in Option Selling part II!
New 2011 highs for stock index futures?
The stock market has made an art out of "blink and you miss it" corrections. Although we had originally thought the dip would extend into the mid-to-high 1270's in the S&P, we've now come to the conclusion that the low 1290's could have been "it". From here it seems the stock indices are poised to make new 2011 highs.
As mentioned in yesterday's newsletter, the equity markets are being held hostage by the Middle East and more specifically, crude oil.
Excerpt from recent newsletters (just in case you missed it):
Trade in the stock index futures will be highly dependent on events in the Middle East and their effects on crude oil. As dramatic as the crude rally has been, the market seems to be pricing in a lot of "what if's" rather than reality. This doesn't mean further deterioration of the situation can't occur, but it implies that the market is bracing for the worst and could be vulnerable to disappointment. Keep in mind that Libya produced approximately 1.7 million barrels of crude per day, and so far production has declined to about 700,000 barrels. However, the U.S. imported only about 51,000 barrels per day from Libya and this accounts for less than 1% of total crude imports. Also, the International Energy Agency and Saudi Arabia have pledged to cover any shortfall in supply resulting from ceased operations in Libya. In other words, don't get caught in the hype just yet...
It appears as though oil prices "might" have seen a key reversal; if so, the equity markets may be finding support sooner than many had thought. In stark contrast to the ideal held by traders in much of 2010 in which it is believed that higher oil, meant higher oil stocks and therefore higher stock indices; traders are now assuming higher energy prices will choke the recovery. In other words, the correlation has gone from positive to negative and a pullback in crude oil could trigger "bargain" hunting in equities.
There are other analysts with this view; according to Jim McDonald of Northern Trust in Chicago, "If we see oil prices normalize back down to where they were at the end of the year because of increased stability in the Middle east, that would be constructive to global growth and investors would love that."
Monday's tend to be bullish days for the equity markets, and we doubt that the upcoming session will be any different. Despite a temporary scare, we think the bulls will be reloading (assuming a lack of event risk over the weekend and stable crude oil prices). If we are right, the S&P could see prices as high as 1350 in the coming week or so. Similarly, the Russell could see 844 and the NASDAQ 2423.
* 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. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already factored into current prices, any references to such does not indicate future market action.
Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini. Unless otherwise noted, profit and loss will be based on the mini version.
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.
