August 25th, 2009
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The trend is your friend until it ends
The trend is up in equities and fighting it has been a losing battle for the bears; however, the upside seems to be limited. September and October are the last of the "worst sixth months" of the year for equities and they have troubled track records with seemingly high instances of volatility. In fact, the Stock Trader's Almanac refers to October as the Jinx month because it has been the host of several crashes.
It was brought to my attention that today is the 22nd anniversary of the beginning of what turned out to be the crash of '87. As the story goes, the daily (and annual) high in the Dow and S&P were made near noon on August 25th and began retreating from there. It wasn't until 8 weeks later that the magnitude of the slide was made apparent by Black Monday.
The Conference Board's Consumer Confidence index rose to 54.1 to beat analyst expectations. Similarly, the S&P/Case-Shiller index on National Home Prices ticked a bit higher last month but are still rather depressing. To put things into perspective, home prices are near levels seen in early 2003. If it weren't for these two somewhat optimistic announcements I wonder if today would have gone much differently. After all stock index futures slid in overnight trade and seemed to be technically weak in early morning trade. Nonetheless, these are the cards that were dealt and we have to play them.
Keep an eye on Treasuries which continue to grind higher. Although there are some positive aspects of this, namely lower interest rates, it suggests that the bond and note markets are still trading on fear. Why else would investors be willing to purchase low yielding securities?
In a nutshell, Treasury buyers haven't completely come to peace with the idea that the recovery will be as swift and painless as the equity market seems to be suggesting. Eventually, either stock traders or bond traders will have to be proven wrong.
We are sticking with yesterday's comments:
So far our upside resistance areas are holding, we noted 1035 in the S&P, 589 in the Russell and 1655 in the NASDAQ. Based on today's action, it seems as though the path of least resistance could be lower. We are looking for a retest of the 1000 area in the S&P, 565 in the Russell and 1577 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. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
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 -
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
- July 28 - We recommended to sell the 925 puts for a little over $8 to take a bit of the heat off of the 975 calls
- July 29 - We recommended to buy back the 975 and sell the 995 to give the trade a bit more breathing room and lower the delta
- August 5 - We recommended to get into a more comfortable position ahead of the employment report by buying back the 925/995 August spread and selling the September 940/1045 spread for a credit of about $3.
- August 24 - We bought back the 940 puts for $4 in premium to lock in a profit on that leg.
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
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
http://www.carleygarnertrading.com/
http://www.decarleytrading.com/
*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.
