April 2nd, 2009

Catch me on Facebook!

New marked to market ruling rocks market!

**Due to time constraints this report was created and distributed much later in the day than is usual.  However, our clients are provided with intra-day commentary and recommendations.  If you found yourself waiting for this post, perhaps you should consider opening a trading account with DeCarley to ensure timely access to the informaiton.

Stocks enjoyed a jolt of what has been deemed to be positive news for the economy and the financial system, or at least that is the market's interpretation today.  Leaders of the G-20 meeting announced that they would be beefing up the International Monetary Fund and government accounting regulations that required banks to value assets on a marked to market basis have been changed.  My suspicion is that this rally will exhaust itself within the next few trading sessions as people rethink the circumstances.  Nonetheless, it has been fun to watch for those that aren't short.  Today's rally brought the broad based S&P nearly 25% off of its twelve year lows last month.  Ironically, the index is still in the red by about 7% thus far in 2009.

Until now, G-20 meetings (or even G 6 through 20) were becoming notoriously unproductive.  This time around, progress was made and the markets cheered.  Only time will tell whether the steps taken were actually productive or counter-productive.  The G-20 pledged to give $1 trillion in loans and guarantees to impoverished countries.  They also agreed to tighten the noose on tax havens and hedge funds.  On the other hand, as expected, views on stimulus package remain widely varied. 

For once, my degree in accounting has actually become useful.  The independent Financial Accounting Standards Board, known simply as FASB, voted to adopt new guidelines to the controversial marked to market accounting rules.  Opponents of the plan suggest that the new higher valuations will drive away private investors to work against the governments new financial rescue program. 

Beginning this quarter, banks will be allowed to value assets based on the assumption of an "orderly" sale rather than a "distressed" sale.  In that case, I would like to account for my house at a value based on what I would receive in "better market conditions" when figuring my net worth on credit applications.  The one thing that I learned about accounting while in school is that there are many shades of gray and nothing is what it seems.  This may be a step in the right direction for now but it will take a lot more than changing a few arbitrary numbers on a balance sheet to "fix" our financial markets.  I am wondering if the euphoria can last much beyond this week. 

We see resistance in the S&P near 855 and again at 864 and believe that there is a chance that we will see the mid-860's tomorrow following the employment data.  On the other hand, we are wondering if profit taking will come into play as the day progresses.  In fact, our clients are working orders to sell call options against an early rally tomorrow.  We like the April 910's but will see how things look in the morning.

If you are trading the Dow, we see resistance at 8,160 and again at 8,230.  NASDAQ resistance can be found near 1326 and distantly at 1363.  We have recently begun commenting on the Russell, and encourage your feedback.  Meanwhile, we see near-term resistance at 463 and again at 473.

* 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 –

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.