April 8th, 2009

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Technical bounce in light volume       

It was a roller coaster session for the major stock indices.  Sharply lower overnight trading turned into a respectable rally by mid-day trade.  However, the buying proved to be fickle and dried up quickly after the FOMC minutes were released.  Nonetheless, light volume seemed to favor the upside as the markets rallied going into the close.

According to the Fed minutes of the most recent FOMC meeting, the economic outlook for the rest of the year has been lowered and the nations GDP is expected to flatten out in 2009 and may slowly expand in 2010.  While most television pundits are screaming inflation, some Fed members are voicing concerns of deflation.

Meanwhile, the SEC is considering several tactics aimed at restricting short selling with reinstatement of the uptick rule on the top of the list.  I realize that I am a biased opinion, but I can't figure out why speculators don't forget about equity trading and make their way to the futures markets.  Futures traders are free to buy or sell the stock indices freely without the worries of borrowing shares or paying interest.  Likewise, there are single stock futures which have yet to gain ground in terms of liquidity but in theory could be a much more efficient way to participate in stock speculation.  Additionally, the tax consequences faced by futures traders is favorable and so is the convenience.  As opposed to a line by line profit and loss record, futures traders claim a lump sum figure on their taxes. 

I will admit, I was expecting a move a little lower than 800 in the S&P before a bounce could occur but the overnight low of 802.25 looks to have satisfied the market.  Despite bearish fundamentals and seasonals, today's close and the chart, is telling me that light volume and holiday trade may temporarily favor the bulls.  I think that 855ish is possible by early next week or maybe even on Friday while nobody is watching.  With that said, lightly traded markets are often better off being left alone...anything can happen tomorrow as traders square ahead of Good Friday.

If I am right about the S&P, the Dow could be in store for a move higher to 8,100, the NASDAQ to 1335 and the Russell to 461. 

* 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 –

April 3 - Sell the mini-NASDAQ at 1337 or better.

*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.