December 10th, 2008

Happy Holidays from DeCarley Trading!

Stock indices quietly higher ahead of automaker bailout...I mean loan.

There seems to be a subtle euphoria surrounding the pending automaker loan.  However, it is difficult to tell which side of the isle Wall Street is standing on.  Stocks gave up most of their gains on Wednesday following signs that the plan to bring U.S. automakers back from the dead could face considerable opposition in Congress.  However, I can't help but think that some capitalistic equity traders are voting against the big three lifeline as stocks failed to break technical support even as details of a group of conservatives threatening to block the current plan were filling the airwaves. 

Tight credit conditions and economic concerns don't bode well for merger and acquisition activity.  Even after one of Yahoo's largest shareholders publicly urged the internet company's board to rekindle the Microsoft deal, both sides remained silent. 

According to a survey conducted by Duke, nearly two-thirds of top-level executives anticipate that the current recession will last another year.  Last year, the CFO survey accurately predicted the current recession...let's hope that this year they are off the mark and the economy recovers prior to next winter.  However, according to John R. Graham, director of the survey and financial professor at Duke's Fuqua School of Business, "Throughout the history of our survey, CFO's have shown remarkable ability to predict future economic conditions" he added, "Therefore, the record pessimism CFO's are currently expressing is ominous."

Due to tight intra-day ranges, my technical outlook remains the same as noted in yesterday's newsletter:

I am still looking for the S&P to get to 935/940 area in the near term, but am cautious about the potential for a move as low as 855 in the coming days before the rally resumes.  I realize that there is a big difference between a move to 940 and a sell off to 855 but unfortunately this is the world that we now live in. 

Likewise, the Dow and the NASDAQ have gotten closer to my upside targets and may be setting up for another day or two of selling pressure.  While I still believe that a larger rally is looming, we may see weakness in the Dow to 8,430 and 1160 before finding legs again.

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 -

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