September 5th, 2008
Lan Turner of Gecko Software interviewed by CFRA, now posted on www.CarleyGarnerTrading.com !
Volatility reigns again.
The complacency in equity trade has been eliminated once again. Some are attributing the recent volatility to the fact that a lot of mutual fund money has been moved to the sidelines in an attempt at capital preservation. In the absence of this typically long term investment funding, the market is said to be more susceptible to aggressive short term hedge fund trading. Accordingly, the market is seeing violent swings in both directions and that is exactly what we have witnessed.
Also hedge fund related, a massive amount of redemption letters (client requests to withdrawal funds) have been received by struggling hedge fund managers. Selling in stocks and commodities, in my opinion, seems to be the direct result of funds honoring these redemption letters and liquidating positions accordingly. If this is true, we may be getting near the end of this wave of selling. Hedge funds typically have 5 days to release funds once a redemption letter is received and that is the approximate length of the latest bout of selling pressure.
Despite the market's immediate sell-off following the employment report, the data alone didn't seem to be enough to trigger such a reaction. As noted above, hedge fund liquidation along with stop running seems to be a better explanation of the move. Nonetheless, the employment report was less than impressive and failed to provide comfort to investors.
According to the Labor Department, the domestic payrolls shrank by 84,000 last month. Most economists were looking for 75,000, so the number wasn't a complete miss. However, the unemployment rate rose to a five year high of 6.1% and this seemed to be the deal breaker in the eyes of the market.
This is the opportunity to sell puts that I have been referring to in this newsletter. I am not convinced that we have seen the low of this move, therefore I recommend placing limit orders that will take additional weakness to get filled. Depending on what Monday morning looks like, I will likely be recommending the September S&P 1160 puts for $4 or better and the Dow 10600 puts for 50 or better.
Have a great weekend!
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 -
September 5 - Try selling the September 1160 put for $4 or better, it will take continued weakness to get filled.
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 -
September 5 - Sell the September Dow 10,600 puts for 50 or better. This can be done in the mini or the full sized. Call me for additional guidance.
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!
September 5 - Place an order to sell this put for 20 or better in an attempt to get your money back...
Carley Garner
Senior Analyst / Commodity 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.
