January 30th, 2009

See DeCarley's article on option selling in the bonus issue of Stocks & Commodities Magazine!

Bad bank rescue falters, so do stocks

U.S. indices fell for the second day in a row as the negative sentiment continues to mount.  Despite better than expected fourth quarter GDP data, the numbers were grim and the mood on Wall Street was similar.  The "icing on the cake" being eaten by the bears was news that the governments "bad bank" plan was on the skids. 

According to Dean Barber, president of investment firm Barber Financial Group, commented on the banking crisis and the lack of organization regarding the bailout; "The banking system is still in crisis mode...The surge we saw in financials earlier in the week was more symbolism than it was substance.  There wasn't anything that had been decided upon.  There's no clarity who is going to get the money, how much they are going to spend."

The advanced fourth quarter GDP report came in at a draw of 3.8%, the fastest pace decline in nearly 27 years.  Coming into the day, analysts estimates were expecting a negative 5.5%.  Accordingly, the data was initially looked at as a positive but the optimism quickly dissipated. 

Overall, we are still looking for weakness in the markets.  However, it wouldn't surprise me to see a moderate amount of buying come in on Monday.  With that said, selling rallies will likely be the money making trade for now.  Our downside target in the March S&P futures is near 790, we are looking for 7,730 in the Dow and 1133 in the NASDAQ. 

Sorry so brief, have a great weekend!

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 –

January 28 - Buy the Feb S&P 760 puts for about $350.  **This recommendations was made in the text of the 28th newsletter but was accidentally referred to as March. 

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.

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.