March 20th, 2009

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Market chews on week's events

Wall Street had a lot to chew on this week.  Aside from key inflation data, we learned that the Fed has dedicated funds to the purchase of its own Treasury securities, Ben Bernanke attempted to shed light on the financial system and the March futures and options expired.  Not surprisingly, the week also entailed significant price moves in both directions. 

Yesterday we were looking for overnight buying into expiration, and we got it...kind of.  I didn't expect the market to sell off before expiration buying took place but it did.  Nonetheless, as we thought may be the case pre-open buying was quickly reversed.  Leading the market lower were banking stocks partly due to word of American Express' yearly loss and the possibility of a cut dividend.  Also weighing the sector was a lack of interest and participation in TALF (Term Asset-Backed Securities Loan Facility). 

According to Jim Paulsen, chief investment officer at Wells Capital Management, "TALF got off to a slow start."  He added, "Who's going to want to get involved in anything that the public money is involved in, if later on they can say anyone who got (that money) has to do a, b and c now."  Mr. Paulsen seems to believe that the failure of TALF is due to the bill passed on Thursday to recoup AIG bonuses. 

The fact that the markets didn't completely melt down seems to be a small victory for the bulls.  In fact, we may see some moderate buying come Monday and may even retest the recent highs.  However, I am sticking with my original assumption that the S&P will soon test support in the low 730's, the Dow near 7,000 and the NASDAQ 1133. 

If you like our support and resistance calls, (and aren't already doing so) come trade with us!  Our clients are free to "pick our brains" and use our projections for their intra-day trades.  This information can be great for traders of all types and strategies. 

Have a great weekend!

* 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 18 - Our clients were recommended to sell the April S&P 870 calls for $7.

·         March 20 - We recommended that our clients buy these back at $2.  However, some took a profit on Friday and bought them back at $3.20 in premium.  We think that we may be able to get in at better prices next week.

March 18 - Our clients were recommended to buy the April 690 puts for $7.

·         March 20- Our clients were recommended to sell these at $15.  However, some took a profit near $12.75.  We think that we may be able to get in at better prices next week. 

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.