April 28th, 2009

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Awaiting the Fed

Again, stocks managed to pick themselves from up what seemed to be a desperate overnight session.  Slightly positive data and news that IBM will be raising its dividend by 10% offered the market some hope that the economy has turned the corner. 

All eyes are on the Federal Open Market Committee and the looming interest rate decision.  It is widely expected for the Fed to do nothing in terms of adjusting the Federal Funds rate as there is nowhere else for it to go but higher...and they don't see ready to pull that trigger.  However, as is always the case, traders will be focused on clues into future moves by the central bank.  Last month, the Fed dropped the quantitative easing bombshell on the bond market.  Who knows what could be in store for the financial markets tomorrow. 

In light of the event risk, it seems wise to be sidelined ahead of the day's activities.  There are often trading opportunities in post FOMC market conditions but being in the wrong place at the wrong time prior to the announcement can be devastating. 

We would like to be able to sell calls against a swift rally in the S&P to the 830 area and puts beneath the 800.  Obviously it would take a large move for either of these objectives to be met, but it isn't out of the question.

Given that the market hasn't made any notable moves, we still believe in the support and resistance figures reported yesterday:

Resistance in the S&P can be found near 868/872 area with the next potential ceiling looming at 881.  Should the index see 881, we would turn highly bearish and look to construct an appropriate strategy.  In the meantime, significant support lies at 837, 830 and then again at 793. 

Dow traders should look for resistance near 8,200 and support at 7,885 and 7,600.  We have a hard time believing that the NASDAQ will be able to penetrate 1400 and see support near 1314 and again at 1232.

* 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-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.