May 6, 2011
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Stronger $ = Weaker Stock Index Futures
We have been anticipating a large correction in the U.S. greenback that would trigger commodity and stock liquidation but the event hasn't unfolded like we thought that it might. Unlike the 2008 occurrence, commodity trader margin calls haven't resulted in forced equity liquidation and although there is clearly panic in crude, metals and currencies, the equity market decline has been relatively orderly. However, with all of the good news (earnings, Bin Laden, etc) already printed and reacted to, we wonder if the market will continue to be resilient.
This morning's employment report news offered a positive surprise, but the celebration was short-lived in the face of a plummeting Euro and a stronger U.S. Dollar. As you have probably read, gains in equities were almost
identical to the losses in the greenback. Accordingly, if the currency correction continues there could be more pressure put on stocks (and other asset prices). Just as fundamentals didn't matter on the way up, they
might not matter on the way down either. That said, we are certainly not perma-bears...so those looking for a repeat of last year's meltdown might be disappointed. Nonetheless, we aren't comfortable considering the bull
side of things until the market dips below 1300.
Our initial target in the June S&P futures of 1330 has been met but today's failed rally leaves us looking even lower. The next "good" support that we can see will be 1300 but our charts are pointing to about 1294. however, should these prices be seen we "might" consider being bullish. If you are trading the Russell, 810ish (which could quickly turn into 800ish) will offer the first level of support. If we are right about the S&P printing a little under 1300, the June Russell futures could see 770ish.
* 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 -
4-27- Clients were recommended to sell the June 1390 calls for about $10.
5-4- Clients were advised to cover short calls at a small profit (near $8). The options weren't losing as much premium as we were hoping for and, although we are bearish, a lot can happen in 45 days.
(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more. Email us for more information)
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
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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.
