December 4th, 2008

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Stocks struggle on auto-maker drama.

What seemed like a relatively productive session, turned into another nightmare on Wall Street.  Equities dropped sharply in a late reaction to the dismal data as of late, and anticipation of a poor employment report tomorrow morning.  With the exception of the last hour of the trading day, the decline was relatively orderly despite discouraging sales reports from retailers. 

Also weighing on trade, significant job cuts at AT&T and DuPont reminded investors of the soon to be released jobs data.  Market declines ahead of the employment report isn't something new; in fact; it has been the pattern as of late.  Non-Farm payroll estimates seem to be pegging a loss of 300,000, but I have seen some expectations for 350,000 and as low as 200,000.  One thing is for sure, everyone will be watching and the volatility risk is high.  It seems as though most are counting on a terrible number.  In theory, this would favor the odds of a post announcement rally but only time will tell how things play out. 

Each of the major indices has failed to break near term resistance after two days worth of valiant efforts.  This makes me question whether or not the rally will be able to trigger from current levels or if the S&P must trade below 800 one more time. There are too many cards on the table to call a direction in tomorrow's trade.  However, there is heavy support near 775 in the S&P and I could be an attractive level to be a bull.  there is resistance near 860, consistent trade over this level gives me confidence in an advance to 950. 

Unlike yesterday, the Dow closed below its 20-day moving average to leave the index with a slightly lower bias from a technical standpoint.  However, the jobs number will have a big part to play on the direction of the market from its current crossroads.  My gut tells me higher, but I wouldn't be willing to recommend playing the upside until we see a clear move above 8,445.  However, should the employment numbers disappoint 7,752 could be the next stopping point and an opportune time to be a bull.  

The NASDAQ becomes a great buy near 1043, or on a break above 1165 but is a risky trade either way at current levels and circumstances. 

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 –

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 –

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.