December 8th, 2008

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Mutual fund Monday and short covering extends stock index gains.

Expectations of an auto-maker deal and a sense that all of the bad news must be out, has energized stock indices.  The rally comes on the heels of the worst jobs number in over 30 years as well as news of a bankruptcy filing of media conglomerate Tribune Co.  It just goes to show, that trading strictly on fundamental analysis is difficult.  The market often prices in the news before ever being released or confirmed. 

Many claim that the market has grown optimistic in regards to President-elect Obama's plat to boost the crippled economy.  Over the weekend, Obama announced plans for the largest U.S. public works spending program since the creation of the interstate highway system.  In theory, the government program will create work and business for material giant Alcoa and heavy-equipment maker Caterpillar Inc.  However, I wonder if free market enthusiasts will be able to maintain optimism.  We all know that the government programs tend to be inefficient...as an American and a 401k holder I am hoping for the best. 

According to White House officials, the auto deal is "very likely".  At the time of this report, it wasn't finalized but said to be undergoing the finishing touches.  Under the proposed plan, carmakers' would have access to emergency loans on December 15th.  If the car companies don't take the initiatives detailed in the bill to reorganize the money would be recalled by February 15th. 

It is my understanding that the carmakers will be provided with $15 billion of the previously approved TARP money.  However, this is expected to only be the beginning.  Some analysts believe that the "big three" will ultimately need nearly $100 billion to stay afloat. 

In Friday's newsletter, we made the following statement:

Nonetheless, today's session seemed to be a victory for the bulls.  If this assumption is correct, next week should prove to be an early Christmas on Wall Street.  I am looking for 945 in the S&P, 9,130 in the Dow and 1278 in the NASDAQ. 

We are still of the same opinion, but have slightly adjusted the targets.  I see the next major resistance area in the S&P at 940, 9,116 in the Dow and 1263 in the NASDAQ.

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 –

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300. 

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 –

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

Swing Trade -

Flat

There is substantial risk of loss in trading futures and options.