Mid-Day December 23rd, 2008

Happy Holidays from DeCarley Trading!

Brutally light volume equates to poor trading conditions, sidelines.

Most traders, both professional and retail, have opted to spend time with their families rather than with the markets.  We believe this to be the best method of defense against what has been and will continue to be choppy and unpredictable price action.  Trading conditions may improve slightly on the Monday following Christmas, but ample trading volume typically doesn’t return until January. 

In the meantime, it seems as though the markets are destined for an upward drift.  As we have mentioned in earlier newsletters, it seems likely that slow trade will entice the short traders to cover positions and in turn churn the indices higher.  However, despite our upward bias going into the new year we believe that most are better off sitting on the sidelines.  If you had a good year in 2008 there is no point in risking ruin, if you struggled throughout the year there is no reason to make things worse. 

Stocks didn’t seem to take the weak housing numbers to heart.  In fact, equities traded higher immediately following the announcement.  Both new and existing home sales slumped beyond analyst expectations but at this point anything less than devastation is seen in positive light.  However, without a real estate recovery we won’t have an economic recovery. 

The third quarter final GDP data was reported as expected, in slightly negative territory.  However, the markets and investors aren’t looking forward to the fourth quarter growth data which is predicted to be well into negative territory. 

876 in the March S&P looks to be the a magic number.  Trade above this level supports a rally to 922 but weak trade below 876 will likely result in a pullback to 831.  The Dow is similarly mixed when it comes to the technical picture;  resistance can be found at 8,950 and support at 8,240 but the immediate direction is unpredictable.  Once again…uncertainty is high and traders are best off sitting this one out. 

Sorry so brief.  I hope that you are enjoying the holidays and being with friends and family as much as I am. 

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

*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.