December 29th, 2008

Happy Holidays from DeCarley Trading!

Boring trade leaves indices range bound.

It was another quiet day on Wall Street in terms of market participation.  Those trading futures on the CME in Chicago were likely just as bored as insiders note a lack of retail order flow and highly reduced levels of institutional trade. 

Stock index futures caught a moderate bid following an announcement from Washington that vowed to provide $5 billion in financing to General Motors Corporation's financing arm GMAC.  The money was said to be an allocation from TARP and is intended to make it easier for consumers to receive credit when purchasing an automobile.  Jack Ablin, chief investment officer at Harris Private Bank, commented; "This is trying to slow down the economic train wreck."  He added, "Investors are taking a step back, and realizing that this will enable auto buyers to finance their cars and add liquidity to the market."

On a side note, I think it is interesting to point out the magnitude of panic that has filtered its way onto "Main Street".  A contact of mine expressed interest in purchasing silver bullion bars as an investment in which he intends to hold for the next several years.  After making a few phone calls, I was shocked to discover that metals bullion is in such high demand that investors are paying very large premiums to get their money out of the greenback or dollar based assets.  The dealer that I spoke to mentioned that some of the buyers that he had worked with were selling their homes and putting six to seven figures of the proceeds into gold and silver bullion in which they are storing through their own means...garage (if they still have one)?  He also mentioned that some are paying premiums as high as $8 per ounce to purchase silver.  In other words, if silver futures are trading near $11 it would cost you nearly $19 per ounce plus shipping and handling to purchase the bullion.  What is even more shocking is that the premium only accounts for half of the bid/ask spread, how much could one expect to get for selling the metal?  I didn't get a quote, but my guess is that it would be far less than the $11 market price...plus shipping and handling.  In my opinion, this phenomenon is even more disturbing than investing in T-Bills with a negative yield, after all the price of silver would have to double, or more, just to get your investment back. I think this is far more telling than the consumer sentiment index released this morning at a record low. 

Look for resistance in the S&P near 870 and again at 912; major support should be found near 842.  Heavy support in the Dow won't be found until 8,290, in the meantime resistance is near 8,875.

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 –

Flat

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

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.