January 12th, 2009

"Down" Jones struggles to stay afloat.

Weak energy stocks worked against the indices on Monday as crude oil fell over $3 per barrel on the session.  Accordingly, Exxon and Chevron weighed on the Dow.  Investors are likely relating to the plummeting demand for commodities with a lack of demand for other goods and services and even further deterioration of corporate profits.  With earnings season around the corner and profit warnings flooding the media, trepidation is high. 

A press conference conducted by President Bush may have lifted some of the unrealistic optimism regarding Obama's takeover of the White House.  Without getting into political affiliations, in my opinion media banter has set the bar impossibly high for the incoming President.  Whether you agree with his policies or not, I think you will agree with the premise that nothing magical will happen immediately following the inauguration. 

Economic and monetary policy is a process not an instance but the market and many hopeful citizens seemed to have temporarily forgotten.  Any impact, positive or negative, that the Obama plan has on the economy won't be known until well into the future.  Let's hope that the lack of an immediate economic marvel as the President elect steps into office won't result in another wave of liquidation in equities. 

From a technical point of view, the recent pullback in stocks wasn't necessarily a surprise, but I don't think that it is quite over yet either.  We have been calling for 850 in the S&P and it is quickly approaching.  While we could see some buying interest step at such levels, a weekly chart appears to be pointing toward the possibility of 670 in the S&P.  Similarly, DT Trading from the S&P floor believe that we could eventually see prices as low as 650. 

Similarly, our outlook for the Dow to reach levels near 8,320 has become a reality.  From there, we may see buyers step in but the gains may be capped at 8,650.  According to a weekly chart, we could see 6,930 before all is said and done. 

NASDAQ futures are looking to 1160, as we have been touting.  However, long-term analysis projects a retest of the 2008 lows and maybe even a quick stint at 900! 

At this point, our weekly targets are merely possibilities.  Don't bet the farm...we will first have to break several areas of support.  Stay tuned to this newsletter for specifics. 

If you like our support, resistance and target numbers you should consider trading with us (if you aren't already), we have similar intraday analysis that is communicated to our clients upon request by email, instant message and phone. 

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 –

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 Jones Futures and Options Trading 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 Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position 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.