September 2nd, 2009
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Calm after the equity storm
Today's session was in stark contrast to yesterday's trade. Tuesday's plunge occurred on the highest volume in months but today's consolidation had little in the way of order flow. Also, the erratic and highly volatile price action in yesterday's session was nowhere to be found. It is possible that the market will be on hold until Friday's job report.
The FOMC minutes of the most recent Fed meeting was released but turned to be a relative non-event as far as the market was concerned. Fed discussions suggest that they believe that inflation is moderate, the job market is still a "concern" and demand for new housing has strengthened. Altogether it was a relatively neutral account of current conditions.
Most analysts are expecting that the U.S. economy lost about 250,000 jobs last month and therefore the market seems to have priced this in. Unfortunately, we have all become accustomed to this type of number and have even began looking at it as a positive sign of recovery. The market seems a bit heavy and this leads me to believe that the odds favor a weak market reaction to the news should the number come out in line with expectations or worse. It might take a surprisingly "positive" figure below 200,000 to avoid another wave of selling.
Given the directionless trade, our overall outlook remains the same as yesterday:
...we think that a minor bounce could be seen before another wave of selling comes in. Don't be surprised to see the S&P move up to the 1010/1012 area before finding resistance. From an intermediate -term perspective we are still looking for lower prices. I see the next downside support in the mid-to-low 970's and depending on the news, 940 may be possible at some point in September.
Our first support in the NASDAQ will come in near 1578 then again near 1561, it seems as though we could see such levels in the next day or two. We noted our first support level in the Russell near 551 and that seems like a real possibility sooner rather than later; the next support level will be 545.
If you are following the short option trade below in the S&P, we recommended that our clients with multiple positions lighten up last week near break-even due to the risks posed. Unfortunately, that turned out to be a mistake but looking back it may have still been a wise decision as a quiet market is capable of just about anything. We recommended that the remaining short September 1045 calls be bought back on today's dip near $5 to lock in a profit on this leg of the trade. It feels good to be out!
If you want to participate in trades like this, alternatives to this or even more aggressive strategies, give us a call. We would love to have you on board. You may also be interested in my option trading book "Commodity Options", currently on sale at http://www.traderslibrary.com/ and other retail outlets.
* 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 recommended to buy back the 940 puts for $4 in premium to lock in a profit on that leg.
- September 1 - We recommended to buy back the 1045 calls at $5ish to lock in a profit on this leg. It is nice to be flat this market!
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.
