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May 11, 2012  

Staying cool under pressure can be a challenge for traders, here are a few tips (click here).  

Browse Carley Garner's Trading Education Books

E-mini S&P's triple bottom is now a sexta-bottom...but is it a bottom (and is that a word)?  

The June ES futures contract spent the entire week trading in a 20 handle range between about 1340 and 1360.  Unfortunately, for those trying to trend trade, the market moves from one side of the price envelope to the other were swift and convincing.  As a result, we suspect that there were several traders on bad footing (ie. bulls repeatedly buying the highs and the bears selling into the lows).  It isn't difficult to image how quickly the losses can pile up, and most likely the frustration as well.  This is important because now that emotions are involved, and traders have substantial amounts of skin in the game, the break out (in either direction) will be all the more dramatic.   

It feels like this dip will eventually prove to be a buying opportunity, despite the "sell in May" mantra and what is becoming overwhelmingly bullish sentiment.  Nonetheless, the door is still open for one more slide into the low 1330s.  A print at this price would be sufficient to flush the sell stops out of the market and finally retest the March lows the technicians have been eying.   

There is little news to support (or force down) equities on Monday, but starting on Tuesday we'll get a plethora of economic news including CPI, manufacturing data and later in the week the latest in housing and the minutes of the latest FOMC meeting.  In our estimation, the week's data could be supportive to bullish but Monday is a wild card.   

If you are a bull, you might want to consider the low 1340s as a place to nibble, but save the big guns for a possible plunge into the low 1330s (or even the high 1320s).  If you are a bear, congratulations but in my opinion you want to be of the mindset of reducing risk and taking profits.   

From yesterday but still valid:  

Helping to aid our bullish tilt in equities is what we believe to  be a potential reversal in the currency markets.  The U.S. Dollar Index has made its way into the mid 80's which marks the upper end of the multi month trading range.  This time of year is typically directionless in currencies; accordingly, we are expecting resistance to hold for now.  If so, the weaker dollar could provide support to stocks.   

 

The market has made mid-day recoveries in each of the last three sessions but that doesn't necessarily mean the bulls are out of the woods.  We sure wouldn't want to be short this market, but we wouldn't recommend being blindly bullish either.  If ever there is a time to remember the simple rule...buy the dips and sell the rips, it is now.  You can't get too comfortable, or too greedy, in this market! 

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April 27, 2012  Carley was recently interviewed on the nationally syndicated radio show, Your Money Matters...click here to listen (scroll to middle of page).  

Who left the barn door open? Stock index futures bulls are running!  

It has been a running of the bulls type of week on Wall Street despite a rocky start in early Monday morning futures trade.  Compliments of one of the best earnings seasons in history (at least based on low expectations coming in), the June S&P picked up about 1.7% and the NASDAQ well over 2%.   

First quarter earnings growth was originally forecasted to be around 3%, but with the earnings season well underway analysts are now calling for 7% growth.  Annual S&P earnings growth rate is expected to be about 9% for 2012.  As we all know, tech stocks have been leading the charge; stronger than expected earnings reports from Apple and Amazon have propelled prices higher as about 73% of all companies reporting have "beat the street".   

Seasonal patterns suggested the month of April would conclude with a rally; anybody that trusted history likely fared well this week.  Next week (and even next month) gets a little trickier.  After checking with multiple seasonal data sources, it seems there are some slight disagreements in regard to the timing of the infamous "sell in May and go away" trade.  Similarly, stock market performance during the month of May has been rather inconsistent.   

According to the Stock Trader's Almanac, 15 of 20 Mays between 1965 and 1984 were negative but between 1985 and 1997 May was the best month with 13 consecutive gains.  Since 1997, the market has been nearly split for the month of May, but since 1952, in years of a Presidential election Mays have underperformed.  With all of this in mind, we have to enter the month with a near-term bullish bias but will be looking for better prices to  be a bear.   

According to our sources, the first two days in May have a tendency to be positive and our chart work tells us Monday (April 30th) could see some follow through buying.  Accordingly, we are looking for the June S&P to see 1413ish in the coming sessions with a run to 1430 possible should we continue to get positive news. 

If we are wrong, first support comes in near 1381ish.  If you are day trading, look for support near 1388 and again near 1381; resistance lies near 1404 and then 1413.

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April 13, 2012  

For information or to purchase Carley Garner's latest book, Currency Trading in the FOREX and Futures markets visit http://www.currencytradingthebook.com/

Will options expiration save stock index futures?

 Equities lost ground ahead of the weekend but with options expiration on tap, the markets might find a way to find a short-term low early next week.  More often than not, equities have a tendency to trade firmer on the Monday through Wednesday heading into the monthly expirations, and with the market trading at a relative discount it seems the stage might be set for such a move. 

Friday's bloodshed actually started Thursday evening following "disappointing" news of a smaller than expected GDP figure in China.  Nevertheless, China is still growing at a rate of 8%...and I have a hard time seeing that as a complete disaster.  Adding fuel to the fire was activity in the credit default securities that increased the cost of insuring Spanish debt.  In other words, today's selling was based on fear of the fundamentals of other economies rather than domestic issues.  Obviously, the globe has become a melting pot of economies in which we are all linked together so this is something we should accept for the long haul. 

The banks were hit hard on Friday over concerns of a European debt crisis bleed but the fact that we will hear the latest earnings reports from major banks next week likely sparked some of the manic trading.  If bank stocks were able to lead the market lower this week, they are capable of doing the opposite next week (assuming their earnings numbers are a meet, or beat). 

According to the Stock Trader's Almanac, the income tax deadline (Monday this time around) is generally bullish and in line with our seasonal research, they claim the Dow has only been down five times since 1981 on the Monday before the April expiration.  If we get some follow through selling on Sunday night/Monday morning, look for support in the June S&P near 1359 and 1348.  If we get an expiration rally, we'll be looking for the mid to low 1390's.  If we're wrong about the market finding a bottom, the next major area of support is 1330ish. 

If you are day trading, look for support at the levels mentioned above and intraday resistance near 1378 and 1386.  

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April 5, 2012  

Click here to check out the latest Futures for You column in Stocks & Commodities Magazine, written by Carley Garner of DeCarley Trading!  

Stock Index Futures unch'ed ahead of payroll data

The U.S. government will release its widely anticipated employment report to a miniscule audience.  Most traders will likely sleep through the announcement due early tomorrow morning rather than wake up to thinly traded markets and a limited time frame to react to the news.  Although the lack of market participation has the potential to wreak havoc in the event of a large miss in the headline figure, we doubt it will happen.  Instead, it seems more likely tomorrow morning will be a relative non-event ahead of a long weekend.

In yesterday's newsletter we mentioned S&P support in the mid 1380's and that area held on Thursday.  Whether that continues to be the case will be highly dependent on the employment report.  Most traders are looking for 200,000 jobs added across both private and public sectors.  I believe that anything above 180,000 will be considered a positive.  The bears will likely need 150,000 or below to get some really downside spill pressure. 

If you are a position trader, you are likely best off going into tomorrow's data flat the market.  Light volume and event risk make holding substantial positions nothing more than a crap shoot.  With that said, should there be a substantial rally tomorrow or early next week, traders might look to initiate bearish positions near 1424, and perhaps more aggressively near 1436.  We often see tax selling pressure in the second week of April; therefore, any sharp rally might be good for a short-term bearish trade. 

If the report is a disappointment, we could see a slide into the mid 1360's.  The chart says this might be a place for the bulls to step in, but we aren't willing to get comfortably bullish following the best quarter in a decade. 

We aren't comfortable providing day trading support and resistance numbers ahead of a long weekend because a lot can change between now and Monday.  As always, if you have a trading account at DeCarley Trading, feel free to contact us on Monday for guidance.