September 3rd, 2008
Lan Turner of Gecko Software interviewed by CFRA, now posted on www.CarleyGarnerTrading.com !
The Beige Book was a relative non-event.
The major stock indices were under pressure as the market continues to focus on economic growth, or the lack of. Traders seemed to spend much of the day waiting for the Fed Beige Book to be released and the remainder of the day ignoring its contents.
According to the Fed, the economy across the country has experienced slowing growth in recent weeks but has gotten some welcomed relief from commodity pricing. On a more positive note, the Commerce Department reported an increase in manufacturing orders of 1.3% in the month of July to beat analyst predictions.
Trade will likely be cautious ahead of the employment data due to be released Friday morning. In the absence of a major catalyst, we may be in store for sideways trade in tomorrow's session as investors brace themselves for what can sometimes be a violent reaction to the non-farm payroll release.
The CBOE's Volatility Index, commonly referred to as the VIX has been on a steady decline in recent weeks and seems due for a change of pace. It may be a good idea to get "long volatility" through the purchase of options; however, you want to be careful in how much you spend as most options are doomed to expire worthless. It doesn't make sense to spend a fortune on a lottery ticket.
If I am right, and we do see a sudden increase in volatility it may be a good opportunity to sell puts against the trend. Keep in mind that a spike in the VIX normally coincides with a large down move in the S&P. Thus, put premium will be at a maximum. However, there are no "free lunches" as the risk will also be elevated.
I would like to see the S&P at or near 1260 before even considering put selling, although I plan to be patient as there is a possibility for much lower prices. Some models are suggesting prices as low as 1200. A move such as this may be necessary in order to ignite buying and pull this market out of its current rut. I see support in the Dow at 11,300 but 10,700 isn't out of the question and would likely prove to be an excellent opportunity for the bulls.
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 Futures and Options Trade Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Dow Futures and Options Trade 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 Trade Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
August 1 - If you took our advice, you would be long the September e-mini NASDAQ 1670 puts for about 20 points or $400.
August 12 - Not off to a great start, but things may begin to look better from here.
Carley Garner
Senior Analyst/Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701
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.
