November 14th, 2008

See me in the latest issue of "Technical Analyst", Trading Volatility with the VIX

Stocks give some back on weak economic news

Stocks traded sharply lower following yesterday's massive intraday rally leaving many to wonder whether the market is a 'one hit wonder'.  Some weakness was to be expected given the magnitude of the move from low to high in the previous session but could have taken the wind out of the sails of many bulls.  However, a speech given by Treasury secretary Paulson ignited a new attitude and a rally back into positive territory...which failed going into the close.

It was a big news day for a change, but nothing was of use to the bulls.  The widely anticipated retail sales data was expected to be disastrous and delivered.  A decline of more than 2% marked the fourth consecutive decrease and is the longest stretch of contraction on record.  The headline number was reported to be a decline of 2.8% and set another record by being the biggest drop on record. The previous was set after the September 11th terror attacks in 2001 and was a drop of 2.65%. 

President Bush is hosting a G-20 meeting which will be attended by leaders of the world's wealthiest nations as well as some major developing countries such as China and Russia.  The meeting, spanning two days will come to a conclusion on Saturday.  Among other things, they will likely be discussing the implications of the shift in the TARP plan from repurchase of troubled mortgages to the purchase of bank stock. 

I will admit that I liked the markets better yesterday but I still think that the overall momentum will be higher going into the middle of next week.  I am cautiously looking for the December S&P futures to test resistance near 925 in the coming sessions and the Dow 8,880.  However, a break above these levels could mean that we are off to the races.  If this occurs, my upside target in the S&P will be 1012.  The Dow could see a rally to 9,665 and the NASDAQ has potential for a move to nearly 1400. 

Have a great weekend!

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 29 - Clients were advised to purchase the November mini S&P 700 puts, fills were at or near $6 or $300.

·         November 7 - These are underwater, but not out of the question.  Place an order to sell them at or near $15.

November 12 - Our clients were advised to buy the December e- mini S&P 500 1030 calls for $6 in premium or $300. 

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

Swing Trade -

Flat

There is substantial risk of loss in trading futures and options.