March 26th, 2009

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Stocks are resilient but can it weather quarter end

History suggests that the bears will control trade as the end of the first quarter approaches.  However, chatter among insiders is that mutual fund buying could continue into April due to sidelined cash, window dressing, etc.  There are only 3 trading days left in March and I think that it is safe to say that they will be exciting.

We are approaching month end with respect for the upside but expectations for some downside.  However, we have not forgotten that April is typically the best month of the year for the Dow.  The blue chip index has averaged nearly 2% since 1950. 

Yesterday's late session sell-off was triggered on news of light demand for 5-year notes in the U.S. Treasury auction.  Conversely, today's issuance of 7-year notes was met with decent demand and gave stock market bulls another reason to buy (or at least shorts a reason to cover). 

Today's buying also seemed to be on the heels of "not so bad" news and this makes me question whether the market can avoid a digestive move lower in the near-term.  Kevin Kramer, chief operating officer at West End Financial Advisors, said it well.  "Just because things aren't getting worse doesn't mean they're getting better."  He added, "You stopped the flow of blood out of my body, but it doesn't mean I'm going to survive." 

The markets tend to bottom about six months before the economy does, but my gut tells me that the bear isn't over quite yet...and even if it is the odds seem to favor a moderate pullback from the recent move. 

We have adjusted our technical areas higher due to market conditions.  New resistance in the S&P is near 832 and 841.  The Dow is facing resistance at near 8,050.  If you are a Russell trader, we see a ceiling near 444 and again near 451.  1290 and 1302 are major resistance areas in the NASDAQ.

* 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.