August 21st, 2008

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Despite a large rally in commodities and a rough beginning to the trading day, the major indices managed to pair losses as the day progressed. 

What could have spelled disaster, ended up having little impact in the overall direction of prices.  Light volume and a lack of trading interest continues to be a big issue.

There wasn't a lot in the way of economic news, but crude oil managed to steal the spotlight with a $6 rally at one point during the day.  The move came as tensions in Russia seem to be escalating, in turn fears for a disruption of energy shipments to Western countries.  Adding fuel to the fire was a weaker U.S. dollar. 

Many investors are looking toward the commodity markets for guidance in stock trade.  "Oil is the driver and then it depends on a series of other factors that are kind of like magnifiers," claimed Doug Roberts, chief investment strategist at Channel Capital Research.

The market's uneasiness about the financial sector are still apparent but Fannie Mae and Freddie Mac helped to pull stocks off of their lows.  In disappointing afternoon news, Citigroup analyst Prashant Bhatia lowered his third-quarter estimates for Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley.  Additionally, the Conference Board's leading economic indicators, intended to predict economic activity in the next three to six months, showed a .7% drop for the month of July.  The announcement offset any positive tilt provided by a better than expected Philly Fed number and weekly jobless claims. 

What was once support is now resistance.  1275 remains a critical juncture for the S&P, picking a direction from here is difficult.  However, the longer that the market trades sub-1275 the more likely it is that we will see a move to 1240. Similarly, the Dow must get (and hold) above 11,478 in order to avoid a sell off as low as 11,000.  The NASDAQ has managed to hold support just under 1900 and may be poised for a bounce toward 1917 and possibly much higher depending on the direction of the broad market.

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 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 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 Recommendation

**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 

www.DeCarleyTrading.com 

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.