February 18th, 2010
Equities creep higher, but rally might stall soon
You could say that it was an optimistic Philly Fed manufacturing index that promoted higher equities, but it probably wasn't. After all, a much hotter than expected reading on producer prices could have been enough to trigger a roll-over in stocks. We believe that it was light volume and a large pocket of buy stops above 1100 in the S&P paved the way for an extension of the rally. Nonetheless, we have our doubts in regards to substantial gains from here.
According to the Philadelphia Federal Reserve, it's manufacturing index rose to 17.6 from 15.2 in January. On the other hand, Wal-Mart reported a drop in quarterly sales and dropped sales and revenue forecasts. Also, the Labor Department reported an increase in the weekly jobless claims and inflation concerns were rekindled with a much hotter than expected PPI reading.
A late day announcement by the Fed surprised the overnight session that resulted in a 9 handle sell off in the S&P. The fed announced that it is raising the discount rate by .25% to .75%. While this doesn't necessarily have a large impact on rates or corporate earnings, it does symbolize the Fed's eagerness to get things back to "normal".
Prior to the announcement, we were looking for moderately higher prices before a market reversal but the knee-jerk reaction leaves us a little less confident in another wave of buying. It is hard to say whether the highs are in, but we are likely close. We like the idea of selling on rallies; look for resistance in the S&P near 1115ish and near 632 in the Russell and 1836 in the NASDAQ.
Our clients were recommended to sell S&P calls in afternoon trade, but our asking price was accounting for a move in the March futures to 1110 or higher. Accordingly, the order was unable to fill...and it seems as though the Fed might have interfered with our speculative plans....stay tuned.
* 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 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.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
January 21 - Our clients were advised to sell the March S&P 1000 puts today following the drop in an attempt to capture the market volatility in the put premium. Fills were coming in from $8 to $9.
- February 17 - Clients were advised to exit this position today to lock in a profit.
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.decarleytrading.com/
http://www.atradersfirstbookoncommodities.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.
