April 16th, 2009

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Equities leaning higher ahead of Citi

Better than expected earnings from JP Morgan Chase kept financial stock bears in check but the announcement of Citigroup earnings will undoubtedly have an impact.  In the meantime, the April options will expire tomorrow and the impact of position squaring could be part of what has kept the rally intact.  I wouldn't be surprised to hear that there are a significant number of short call traders buying futures to hedge positions in the final day. 

Economic guidance was mixed on the day.  According to the Labor Department, unemployment claims dropped to a seasonally adjusted 610,000 but it was a bittersweet victory as the number of people receiving jobless benefits exceeded 6 million for the first time ever.  The Philly Fed index was reported to be better than expected at a negative 24.4 but housing starts were weaker than expected and the IMF's semiannual economic outlook painted a bleak picture.

We were right to be cautious coming into today.  I hope that you were able to take our advice regarding any bearish positions.  If you are following or participating in the NASDAQ recommendation below, I hope that you were able to liquidate the remaining long call position today.  If not, look to do so early tomorrow.

The market may be setting up for an exhaustion of the rally with 872 being significant resistance in the S&P, 8,210 in the Dow, 1370 in the NASDAQ and 478 in the Russell.  At or near these levels we become bearish once again.

* 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.

 April 16 - I hope that you were able to liquidate the remaining long call position today.  If not, look to do so early tomorrow

*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.