October 14th, 2009

 "Your book (Commodity Options) just paid for itself 358 times today...I'd call that a good investment any day!!!  I'm buying 2 next time"~Jonas Miller.  (*Past performance isn't indicative of future results). Pick up a copy of "Commodity Options" at any major bookstore or online outlet!

Getting toppy, but Dow 10k...why not S&P 1100?

It has been a year since the Dow Jones industrial average (equities not futures) and after weeks of media banter, it finally happened.  After reaching a low of 6,547.05 March 9th, a 12 year low, the Dow managed to break 10,000 just seven months later.  Clearly, there are still some issues that need to be worked out...high unemployment and a weak housing market. 

Upbeat earnings after yesterday's closing bell by tech bellwether Intel started the overnight futures session on good footing.  In fact, the reopen of afternoon trade saw an immediate 10 point climb in the S&P.  Adding to the bullish tilt, JPMorgan Chase reported optimistic earnings numbers. 

The FOMC minutes didn't offer many surprises but did continue to shine a positive light on the economy.  Although the Fed notes a weak job market they also believe that the unemployment rate will decline to 9.25% by the end of 2010.  Conversely, if that is the level that it is expected to decline to in the next year, they must be looking for more pain in the near-term but the market didn't seem to mind.  The minutes also noted that the recovery is expected to be "restrained" but most members though that an economic recovery was underway. 

While there looks to be a little more room for the rally to run, I wonder if the market is setting up to be a textbook example of a "buy the rumor sell the fact" scenario.  Confirmation of the recovery has been provided,  but the market has outpaced the actual progress and in the coming days, or possibly early next week, there could be some corrective trade. 

In yesterday's newsletter we were calling for another run in the S&P into the mid-to-high 1080's and that is exactly what we got.  Our next resistance is 1095 but we think that given the Dow's recent accomplishment the S&P will likely kiss 1100.  That said, we think that trade will begin to get heavy.

Our targets in the other indices haven't changed.  Look for a possible move in the NASDAQ to 1075ish and about 626 in the Russell (but there is potential for a spike to636)...we are looking for a potential reversal from noted levels.

Our clients were recommended to sell calls against today's equity market strength.  Fills on the November 1135's were coming in near 7.50 and some sold the 1040's at 7.25.  We feel as though the market might move a little higher in the near-term but like the prospects over the next week or two. 

* 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.  Charts provided by Track 'n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

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 –

October 14 - Our clients were recommended to sell calls against today's equity market strength.  Fills on the November 1135's were coming in near 7.50 and some sold the 1040's at 7.25.  We feel as though the market might move a little higher in the near-term but like the prospects over the next week or two. 

Russell 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.

Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.