January 8th, 2009

Equity bias lower, but temporary bounce may occur.

Disappointing sales figures from Wal-Mart sent stocks sliding in pre-market trade and so went the day.  Prior to this morning, discount retailer Wal-Mart was believed to be one of the few companies that were semi recession-proof. 

It is clear that there is no hiding from the economic debacle.  The nation's largest retailer claimed that same store sales in the month of December rose for about 1.2%, less than analyst expectations;  accordingly, sales forecasts for fourth-quarter earnings.  I am sure that a majority of retailers would be ecstatic to have positive sales data.  Nonetheless, shares fell more than 7% in early trade. 

President-elect Barack Obama delivered a speech today in order to rally support for his spending proposal.  He pled, "In short, a bad situation could become dramatically worse" without the help of Congress. 

Opponents, and perhaps even supporters, argue that he has yet to lay out a detailed plan.  With a price tag that could reach nearly $775 billion in tax cuts and spending there are a lot of uncertainties.  Inflated confusion and the realization that, regardless of the policy, the economic trench will take years to climb out of, could prevent further equity gains in the near term.  Although, there could be a short lived bounce from immediate support levels, look for the March S&P 500 to find its way lower to 850.  Likewise, the Dow should trade below 8,370 by sometime next week.  If you are a NASDAQ trader, a break of 1216 should pave the way for a move near 1160. 

With that said, expectations for tomorrows jobs numbers are bleak at best.  After ADP's prediction of a negative 700k jobs number, anything in the vicinity of 500k could be seen as positive (scary I know).  Thus, an early morning bounce in tomorrow's session following the announcement could be an opportune time to re-establish bearish positions. 

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.