December 11th, 2008

Happy Holidays from DeCarley Trading!

Equity Indices give up ground, but bulls aren't down and out.

The major stock indices traded within a relatively narrow range for a majority of the session, but late day selling managed to break support levels.  I expect that the selling will continue into Friday but also believe that the bulls will regain power heading into next week. 

Once again, all eyes are on Washington as lawmakers struggle to decide the fate of the auto bailout bill.  The bill was passed by the House late Wednesday evening (early evening for those of us on the west coast) but questions as to whether the Senate is on board raised tension. 

Most analysts are convinced that the bill will eventually be passed, but are frustrated with the dramatics surrounding the event.  Neil Massa, trader at MFC Global Investment Management commented, "If this doesn't pass, the market would show it wasn't happy with that."  He added, "There would just be many more people unemployed that would be a drain on society instead of a contribution, and that's never a good thing considering we're in a recession.  I can't imagine they'd let that happen."  Nonetheless, Republican opposition argue that any taxpayer support should carry significant concessions from the UAW and creditors.  They also oppose stringent requirements regarding environmental product development.  I will let you decide which side of the fence you are on, but for the sake of market stability I am hoping for a timely resolution.  I think that the market will have a more negative reaction to a prolonged and chaotic decision-making process than it might a negative one. 

On a side note, the U.S. Labor Department reported that jobless claims increased by 58,000 last week to 573,000.  This is the highest reading in 26 years.  Also, the Census Bureau noted that both exports and imports fell in the month of October. 

We have been calling for a possible move to 855 in the S&P, and it seems as though it is underway.  Our targets in the Dow and NASDAQ of 8,430 and 1160 respectively look to be likely in tomorrow's session.  However, we aren't counting the bulls out.  Historical statistics show that stocks have a tendency to trade higher in over the next two weeks.  Additionally, it looks as though light volume may favor the long side as shorts continue to feel the squeeze. 

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 -

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