March 17th, 2009

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S&P seems destined for 800!

Yesterday's late session selling left some room for the bears to get comfortable but it didn't last.  Stocks are on a roll, and the shorts are scrambling to get out of the way.  A surprisingly upbeat report on housing starts sparked buying in the homebuilders and eventually lead the broad market higher.  The major indices were given an additional boost by a tame PPI reading and another bout of short covering ahead of the FOMC decision (or lack of decision) tomorrow. 

This is one of the least scrutinized FOMC meetings in recent years simply  because there isn't much room for alternate outcomes.  It is highly probable that the Fed will leave rates at the current near zero level.  What is uncertain is any commentary that suggests alternative methods of monetary policy, revisions on the economic outlook, etc. 

The current rally has yet to disappoint but that may eventually be in the cards.  However, for the time being it seems as though the path of least resistance will be higher for stock index futures.  The S&P is facing significant resistance near 773; depending on FOMC developments we could see prices at or just above 800 in the coming sessions.  That said, I have a hard time imagining the rally extending itself much further.  If you are following the Dow, similar resistance is near 7,340 with an ultimate target of about 7,800. 

We are still looking for the NASDAQ rally to extend itself, but despite the fact that it has been the (dare I say it..?) safe haven of the stock indices we have revised our upside target slightly lower.  We have resistance near 1210 and see some possibility for prices to reach 1230. 

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.

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 –

March 3rd - I like buying the April 800 calls for about $7 in premium.

·         March 10 - Place an order to sell these for $15 or better.  You should be out of this by now, if not get out!!

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.