Futures Market Blog

March 3rd, 2009

Option traders, if “Commodity Options” can save you one tick…you will recoup most of your investment.  Get it now through Amazon.com (discounted) or Borders.com!

Slow data day, but lots of chatter

There were only a handful of government economic reports released during the session, but comments from President Obama and testimony by Fed Chair Bernanke and Treasury Secretary Timothy Geithner kept traders on their toes.  Some of the mid-day buying was enticed by Obama’s claim that share prices are a potentially good deal at current levels.  However, the good mood didn’t last.

Bernanke wasn’t the cheerleader today that he was a few weeks ago but all in all there wasn’t an overwhelmingly negative response to his Congressional testimony.  Lawmakers were relatively hard on the Fed chair when it came to the latest bailout of AIG.  Nonetheless, Mr. Bernanke insists that the economic recovery hinges on the government’s success in stabilizing the financial markets and this includes the larger players.  He didn’t speak highly of the operations of AIG and the circumstances that allowed for their demise.  “I share your concern, I share your anger.”  He added, “It’s a terrible situation, but we’re doing this to protect our financial system and to avoid a much more severe crisis in our global economy.”

On the economic front, GM sales in the U.S. dropped 53% in February.  The firm intends to produce 550,000 vehicles in North America next quarter.  In the same quarter in 2008, GM made 834,000.  Ford sales weren’t much better, they reported a decline of 48% last month.

In yesterday’s newsletter, we mentioned that we were looking for a “relief rally but suspect we will see a little lower before we see higher prices.”  Although, we did see lower prices in today’s session as we were predicting, it seems as though another day of declines is likely.  That said, it seems as though a major low is setting up.  If you are short this market, you should be playing with tight stops as the backlash could be vicious.  Option traders should be buying calls and selling puts…or all of the above.  I like buying the April 800 calls for about $7 in premium.

We see major support in the S&P at 677 but once the short squeeze begins we could see 791 in short order.  Support in the Dow is now 6,620 but with so many bears a turnaround could lead to a push toward 7,400.  We still see 1020 as the next major support in the NASDAQ.

* 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.

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 500 Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -

March 2nd - Sell a March S&P 620 put for $7.25 or better ($362.50 in a mini and $1,812.50 for a full sized contract).  Place an order to buy this back at $3.  The risk is unlimited and the profit potential is limited to the premium collected.  Be careful with this one!

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 Jones 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
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.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.

The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations.  To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity.  Bank of America followed suit, falling a whopping 26%.  Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent.  With its stock trading at $1.50/share, investors are pricing the company for bankruptcy.  Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned.  With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term.  The futures are already trading down 2.2% in Monday’s pre-market.  The U.S. economy is slowing faster than expected, and the global economy is following suit.  Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world.  The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital.  Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them.  It’s hard to find a bright spot in the U.S.  However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line.  Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is.  With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing.  Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point.  Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line.  Hence, all of our correlations are pointing towards a continued selloff in U.S. equities.  Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise.  However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level.  Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively.  To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively.  The S&P futures are currently trading at 718.75.

The S&P futures were slammed on Friday as Prelim GDP came in far below analyst expectations.  To make matters worse, Citigroup crashed nearly 40% on the news the U.S. government will convert most of its preferred shares to common stock, thereby diluting shareholder equity.  Bank of America followed suit, falling a whopping 26%.  Even though Bank of America remains afloat, the nationalization of Citigroup seems imminent.  With its stock trading at $1.50/share, investors are pricing the company for bankruptcy.  Seeing as the bankruptcy of Lehman Brothers resulted in a catastrophic freeze in the credit markets, the government will likely need to step in and finish the job as far as nationalization is concerned.  With the S&P futures closing beneath 2008 lows, we could witness a massive selloff to the downside in the near-term.  The futures are already trading down 2.2% in Monday’s pre-market.  The U.S. economy is slowing faster than expected, and the global economy is following suit.  Due to the interconnectivity of the global economy, as one domino drops the rest come crashing down, perpetuating the economic contraction in the around the world.  The EU and Britain are experiencing another wave of troubles in their respective financial industries with their largest banks reporting disappointing earnings and searching for ways to raise fresh capital.  Furthermore, the major economies of Eastern Europe continue their rapid deterioration, pulling down the EU banks with them.  It’s hard to find a bright spot in the U.S.  However, data released this morning showed U.S. spending increased while the Core PCE Price Index came in line.  Investors are now waiting on the ISM Manufacturing PMI to get an idea of how bad America’s manufacturing sector is.  With the other major economies contracting, it’s hard to believe demand for exports will provide any boost for U.S. manufacturing.  Correlation wise, Crude futures are dropping below our 2nd tier downtrend line as our uptrend line meets an inflection point.  Additionally, the 30 Year T-Bond futures are walking upwards while Gold bounces off our 1st tier uptrend line.  Hence, all of our correlations are pointing towards a continued selloff in U.S. equities.  Meanwhile, the S&P futures remain well below our near-term downtrend line, giving us little reason to be positive trend wise.  However, there is a positive note in the fact the S&P futures should find near-term psychological support at the 700 level.  Fundamentally, we find resistance of 724 with fresh 2nd tier and top-end hanging at 731.75 and 738.75, respectively.  To the downside, we see support of 716.75 with 2nd tier and bottom-end sitting at 711 and 700, respectively.  The S&P futures are currently trading at 718.75.

February 25th, 2009

Pick up your copy of “Commodity Options” published by FT Press in any major bookstore or online retailer!

Choppy trade as shorts cover on dips

Ben Bernanke seemed to have revived the financial markets, at least temporarily, for the second consecutive day.  At one point the S&P was trading nearly 20 points into negative territory; however, details provided for “stress tests” and the granting of immediate access to further government support from the $700 billion bailout fund managed to turn stocks around in late session trade.

Bernanke clearly stated that there are no talks in regards to nationalizing the banks.  Accordingly, the Treasury Department announced that the government is prepared to purchase preferred shares of bank stock that are convertible into common shares.  They expect to do so at a discount of 10% of their price before February 9th.

Stress tests conducted by the government to ensure that the banks have enough capital to survive a downturn are expected to be completed by the end of April.  The results of the test will determine whether or not additional assistance is needed and will test their ability to survive even rougher conditions than they now face.

Investors seemed to enjoy the details of the plan, or at least the bears saw it as enough of a threat to cover short positions.  However, the indices are plagued with a “sell all rallies” mentality.  Until the attitude toward the markets change, this will prevent any sustainable gains.  That said, the only event that is capable of triggering such a dramatic change in sentiment is a large short squeeze.  Once the market reminds the bears that there are no “free lunches”, stability may return.

Today’s choppy trade and weak close has thrown off our technical analysis a bit.  There is still substantial risk of a short covering rally, thus the bears should avoid getting comfortable.  In fact, we see potential for over 800 in the S&P and 7,800 in the Dow.  However…Wednesday’s late day sell off may lead to another flush out before the rally can occur.  We like selling puts and or buying calls against sharp weakness.  If we do get a flush out of the longs and a spike in the VIX you may want to consider one by two ratio put spreads as an attempt to take advantage of the volatility.  The spread could be used for speculative bears or as a hedge against bullish positions.

* 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.

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 500 Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.

• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.

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 Jones 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
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.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.

February 24th, 2009

Pick up your copy of “Commodity Options” published by FT Press in any major bookstore or online retailer!

Bernanke sparks rally on Wall.

Federal Reserve Chairman Ben Bernanke offered some temporary solace from the doom and gloom portrayals that have plagued the media.  While Bernanke was clearly disappointed in the current health of the economy, he predicted that the there is a “reasonable prospect” that the recession will end this year.  With that said, he also noted that the economy is likely to continue contraction in the first half of 2009.

Bernanke’s proclamations weren’t necessarily the rosy picture that we would like to see, but it was enough to tweak the nerves of the shorts.  As those with bearish positions began to cover, buy stops were triggered to add frenzy to the buying.

While “Big Ben” may have been the catalyst to the rally; it is up to President Obama to keep the torch lit.  He will be speaking tonight at 9 pm EST in regards to his plans to help stabilize the financial system.  He is also expected to prep the public on the idea that more “stimulus” could be necessary.

In yesterday’s market commentary, we noted the possibility on a short covering rally compliments of the plethora of speeches out of Washington…so  far so good.  We could see some back and filling  but overall we are still looking for the projections made in yesterday’s newsletter:

Believe it or not, we think that the S&P could make its way back to 817 in the coming week or two and the Dow could see 7,800.  Resistance in the NASDAQ will be found at 1205…assuming that we can get a short covering bounce.

* 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.

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 500 Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -

February 18 - Short March S&P 660 puts at $8, looking for a quick rally to cover.

• Buy this back at $3 or better to lock in a profit of $250 minus commissions on a mini and $1,250 minus commission on a full sized contract.

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 Jones 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
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.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.