September 4th, 2008
Lan Turner of Gecko Software interviewed by CFRA, now posted on www.CarleyGarnerTrading.com !
Equity market volatility ticks higher.
Many are questioning why equities struggled, especially ahead of a big event such as the employment report. The bottom line is that, stock trade was simply getting too complacent and the market was due for an uptick in volatility. Treasury bonds have been enjoying a flight to quality bid that seemed to discretely signal that investors weren't quite comfortable with other asset classes.
The day's data certainly didn't help the bulls case; retail data and ADP estimates on tomorrows jobs data were lackluster and failed to ignite bargain hunters. The nation's largest retailers reported that shoppers seemed to have diverted otherwise discretionary spending toward food and energy. The light at the end of the tunnel was better than expected earnings from retail giant Wal-Mart. However, luxury chains and teen shops underperformed. While the Wal-Mart data gives some hope, it also paints a telling picture of the economy. During times of low consumer confidence and or spending power shoppers migrate to discounters and bypass high end retailers. That is clearly what we are seeing here.
Similar to Treasuries, stocks look to have priced in the worst when it comes to tomorrow's employment report. Unlike Treasuries, however, I am not convinced that stocks are at an extreme enough level to find a long-term bottom....not yet anyway.
If you follow this newsletter, you know that we had been calling for an uptick in volatility and today seems to have delivered. The CBOE's VIX index has krept to the mid-20's and may have some room to move yet.
The question now becomes whether or not this was a one day event or if there will be some follow through. As much as my heart would like to see equities recover from these levels, my gut tells me that this isn't the time. While this is highly dependent on tomorrows news events, I see the potential for a drop in the S&P to 1200 and maybe as low as 10,700 in the Dow. Option sellers should be looking to sell puts but patience will be key. Early entries could be fatal.
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.
September 4 - These may come back to life!
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.
