carleygarner
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March 25th, 2010
The beginning of the end for equities?
Stocks took a small breather from the relentless rally leaving many to wonder if this will be another reload for more buying or the beginning of the end. Ultimately, only time will tell what fate has in store for equities but most will agree that valuations appear to be a bit frothy at current levels.
The session got off to a rough start with news of a drop in Portugal's credit rating. The agency, Fitch Ratings, states that their recovery will lag other Euro based countries and notes that this might work against its ability to meet debt obligations.
Also keeping tabs on equities was a wildly higher U.S. dollar. The June Index futures rose over 100 by afternoon trade to put the contract at its 2010 highs. A higher dollar makes U.S. goods and services more expensive and can have a negative impact on earnings and commodity prices.
New home sales fell to a seasonally adjusted annual rate of 308,000. This was a decline of 2.2% from the previous reading and was the lowest level on record for February. However, as has been the case with much of the weak economic data, the weakness is being attributed to the cold weather and therefore nearly overlooked.
A reminder from yesterday's newsletter:
The incredibly light volume continues to grease the upside despite this being one of the most doubted rallies in years. Questionable economic data and technically overbought conditions haven't been enough to turn the markets around, but if history repeats itself the party can't last forever. Before today, the S&P futures have settled positive in 14 of the last 16 sessions with the two closes in the red being by mere 1 and 5 handles. This type of one directional movement isn't healthy but it also unpredictable. Don't forget that the markets can stay irrational longer than any of us can stay solvent. If you are a bear, be sure to wait for good entry prices and offset most of your positions near intraday support levels, chances are that you will be able to re-enter at better prices.
We like the downside of this market, but have been painfully early (or really wrong) in looking for the correction. our next resistance areas are 1178 resistance in the S&P, 1982 in the NASDAQ and 695 in the Russell. On the flip side, support in the S&P could be found near 1138. This translates into 1895 in the NASDAQ and 662 in the Russell.
* 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 be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is 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.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
February 19 - Our clients were advised to sell the April 1165 calls for about $7.50, fills were coming in near $7.25 and a handful at $7.50.
March 5 - Clients with ample margin and guts, were recommended to add to this position by selling the 1165 calls for $9.50.
March16 - Clients were advised to roll half of their short call position into the April 1185/1100 strangle.
March 17 - Clients were advised to roll the remaining 1165 calls into the May 1190 calls to give the market some breathing room.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
March 9 - Sell 1 June mini Russell @ 682 OB
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 -
March 3 - Sell 1 e-mini NASDAQ at 1878 or better
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
*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 beginning of the end for equities?
Stocks took a small breather from the relentless rally leaving many to wonder if this will be another reload for more buying or the beginning of the end. Ultimately, only time will tell what fate has in store for equities but most will agree that valuations appear to be a bit frothy at current levels.
The session got off to a rough start with news of a drop in Portugal's credit rating. The agency, Fitch Ratings, states that their recovery will lag other Euro based countries and notes that this might work against its ability to meet debt obligations.
Also keeping tabs on equities was a wildly higher U.S. dollar. The June Index futures rose over 100 by afternoon trade to put the contract at its 2010 highs. A higher dollar makes U.S. goods and services more expensive and can have a negative impact on earnings and commodity prices.
New home sales fell to a seasonally adjusted annual rate of 308,000. This was a decline of 2.2% from the previous reading and was the lowest level on record for February. However, as has been the case with much of the weak economic data, the weakness is being attributed to the cold weather and therefore nearly overlooked.
A reminder from yesterday's newsletter:
The incredibly light volume continues to grease the upside despite this being one of the most doubted rallies in years. Questionable economic data and technically overbought conditions haven't been enough to turn the markets around, but if history repeats itself the party can't last forever. Before today, the S&P futures have settled positive in 14 of the last 16 sessions with the two closes in the red being by mere 1 and 5 handles. This type of one directional movement isn't healthy but it also unpredictable. Don't forget that the markets can stay irrational longer than any of us can stay solvent. If you are a bear, be sure to wait for good entry prices and offset most of your positions near intraday support levels, chances are that you will be able to re-enter at better prices.
We like the downside of this market, but have been painfully early (or really wrong) in looking for the correction. our next resistance areas are 1178 resistance in the S&P, 1982 in the NASDAQ and 695 in the Russell. On the flip side, support in the S&P could be found near 1138. This translates into 1895 in the NASDAQ and 662 in the Russell.
* 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 be factored into current prices, any references to such does not indicate future market action.
Please note: A mini S&P chart is used because it is 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.
S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
February 19 - Our clients were advised to sell the April 1165 calls for about $7.50, fills were coming in near $7.25 and a handful at $7.50.
March 5 - Clients with ample margin and guts, were recommended to add to this position by selling the 1165 calls for $9.50.
March16 - Clients were advised to roll half of their short call position into the April 1185/1100 strangle.
March 17 - Clients were advised to roll the remaining 1165 calls into the May 1190 calls to give the market some breathing room.
Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
March 9 - Sell 1 June mini Russell @ 682 OB
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 -
March 3 - Sell 1 e-mini NASDAQ at 1878 or better
Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
*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.
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