February 6th, 2009

See DeCarley Trading's "Trade Like a Girl" article in the March issue of Stocks Futures and Options Magazine!

Bad news is good news

Wall Street found solace in the incredibly poor employment reading.  It seems as though bad news, as long as it is not completely unexpected, is seen as a positive in that it is incentive for Washington to pull together.  Investors spend the session awaiting a Senate vote for a $937 billion plan.  In the meantime, Treasury Secretary Timothy Geithner are said to be putting the finishing touches on a plan to overhaul the original Troubled Assets Rescue Plan.  The revised program is expected to be announced on Monday. 

Dan Cook, senior market analyst at IG Markets in Chicago commented on the state of the market.  "All focus right now is really on Washington."  He believes that investors are hoping that the unemployment report was bad enough to push lawmakers into swift action.  "It basically equates to a group of firefighters showing up at a burning house and then arguing over what type of fire hose they're going to use," he said.

Looking at the "board" it may be difficult to imagine that the day begun with one of the worst employment reports in history.  The Labor Department claimed that U.S. Employers slashed 598,000 jobs in January.  This was the largest number of cuts since 1974.  Likewise, the unemployment rate rose to 7.6%, the highest since 1992. 

We were right to be concerned over an upside breakout on short covering.  Now that the squeeze is underway, it seems as though there may be a little more steam left in the move.  It is my guess that the S&P will find resistance near 875 and again at 881 before the selling resumes.  Similarly, resistance in the Dow should be found at 8,490.  The NASDAQ seems to be at a significant area of resistance but may see 1320 before a reversal can occur. 

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.