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Follow through buying, but toppy market?

After some early morning consolidation, equities made their way higher on paper thin volume.  Apparently, traders saw the light news week as an opportunity to take an extended holiday (nobody bother to let me know, I showed up this morning). 

Much of the late session buying is being associated with optimism ahead of the upcoming earnings figures released by financial firms.  Goldman Sachs was scheduled to report quarterly earnings first thing but they made a surprise announcement Monday afternoon following the bell.  The firm beat street estimates to the tune of 100%.  However, aftermarket trade in the shares suggested that traders still weren't impressed.  Stock index futures also failed to budge on the news.  JP Morgan Chase will announce before the open of trade (cash market) on Thursday and Citigroup on Friday.  The near-term fate of the market may be in the hands of these few firms. 

According to sources, April option expiration stats suggest an upward bias.  For instance, the Tuesday prior has been up 15 of the last 20, Wednesday up 11 of the last 20, Thursday up 8 of the last 20 and Friday up 12 of the last 20.  On the contrary, the Monday following expiration has been down 14 of the last 20 occurrences.

At the end of last week, we noted that the S&P could move up to 867/870 area before turning over and this continues to be the case.  While I think that we are getting somewhat toppy in the near-term, it feels as though light volume, short squeezing and stop running wants to take the indices a little higher before the buying dries up.  Beyond 867, I see resistance near 875 but prefer the short side of this market.  Don't forget about the pre-tax deadline selling.!!

The June Russell has reached its February highs and may be due for a pullback.  Nonetheless, light volume may favor the running of stops just above the current high.  This is the index that has lead the market higher and must be the one to lead it lower. If we are right, we could see a correction to about 439. 

If you took the NASDAQ recommendation below, we see resistance near 1360 but still feel comfortable with the downside overall.  With that said, we hope that you took our suggestion to buy the April 1350 call for about $375.  If not, you may want to tomorrow for a peace of mind play. 

* 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

Rusell 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 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.

·         On April 9 we recommended to buy an April 1350 call against this position for about $375.

*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.