March 24th, 2009

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Back and fill trade in the indices

Stock index futures spent the trading day digesting yesterday's massive gains (the fifth best day of all time) as well as testimony from Fed chair Bernanke and Treasury sector Tim Geithner in regards to the AIG bonuses.  If you happened to have the TV on as the House of Representatives committee questioned the top two U.S. financial officials, I hope that your kids were out of the house.  Rational discussion didn't seem to be on the agenda. 

The market doesn't appear to be convinced that the new toxic asset bank plan is necessarily a gem, but there is a sense of relief in that some of the uncertainty is removed.  However, I am questioning whether newly discovered details of what seems to be a challenged plan will be enough to keep the markets afloat beyond this week.  If we haven't seen the highs already, we feel like they will be put in shortly.

I have heard chatter in regards to a suspected continuation of the rally as mutual funds look to "window dress" but that hasn't necessarily been the case.  Based on historical standards the end of the first quarter tends to favor significant selling pressure. 

On the other hand, earnings season is just around the corner and it is typical for stocks to "run" ahead of first quarter earnings only to sell off on disappointment.  Knowing this, it seems reasonable to approach the markets with the assumption that late March selling could create buying opportunities. 

We continue to see resistance in the S&P near 825 and again near 832 and expect that the market will fail to hold above (and possibly even reach) such levels, at least for now.  The Dow may have a little more room to run on the upside.  Aside from resistance near 7,760 there doesn't seem to be any technical barriers until the index reaches 8,035.  1260 appears to be heavy resistance for the NASDAQ, our next level will be 1290. 

* 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 23 - Our clients were recommended to sell the April 890 calls for $6.50 or the 885 calls for $6.  At the time of this report, it was possible to get slightly better prices.  We would like to buy these back within a few days if possible, stay tuned. 

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.