April 15th, 2009

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A "less bad" economy, quiet stocks

According to the Fed, the economy is contracting at a slower pace than has been the case.  They also noted "Retail spending remains sluggish although some districts noted a slight improvement in sales compared with the previous reporting period."  Some interpreted this to be a positive sign, but the bottom line is that it is still contracting. 

On a dimmer note, the Treasury Department claimed that its latest monthly survey of lending activity showed increases in 9 of the nations' largest banks but 12 declines.  Specifically, mortgage lending rose 35.4% and equity lines of credit increased by 17.7%; conversely, commercial and industrial loans plunged 47%.

We are still favoring the short side of the market but realize that it doesn't pay to be "too bearish" given the circumstances.  There is a considerable amount of event risk surrounding the release of financial company earnings.  Additionally, option expiration on Friday is a wildcard that makes speculation even more difficult than usual.  If you are a bear with open profits I would suggest playing it safe by lightening up, hedging or simply locking in a profit.

With that said, we still feel as though the path of least resistance is lower.  We are anticipating about 816 in the S&P before buyers come back to the market.  Our revised target in the NASDAQ is 1270 and we are looking for 435 in the Russell.  The Dow chart looks much more positive than the others, major support comes in at 7,730.

Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296.  Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees.  If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.

* 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 - 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.

·         April 14 - You may have opted to take a profit on this position on today's dip, if not look to buy it back near 1275.

·         April 15 - Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296.  Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees.  If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.

*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.