February 11th, 2009

See DeCarley Trading's "Trade Like a Girl" article in the March issue of Stocks Futures and Options Magazine!

S&P erases last week's gains with all eyes on Washington  

An early morning "dead cat bounce" was quickly met with moderate selling pressure leaving the bears in control.  Barring any surprises by the Fed we will likely see the indices trade weaker in the coming session or two.  However, shorts shouldn't get too comfortable as event risk remains high.

With two versions of the stimulus bill passing in the house and senate, lawmakers spent the day working to find an a final agreement that both legislative bodies can live with.  Putting pressure on the deal, Caterpillar Corporation executives told President Obama that they would rescind some of the 22,000 layoffs that the recently announced upon him signing the bill into law.  Late in the session, news of a finalized Bill sparked a low volume rally from the daily lows. 

Also providing guidance, or lack of, from Washington was the bailout bank CEO's Congressional testimony.  The executives agreed to demands of increased transparency and accountability but they seem to have trouble accounting for taxpayer anger.  Barney Frank began the hearing with the following statement:

"I urge you going forward to be ungrudgingly cooperative...There has to be a sense of the American people that you understand their anger...and that you're willing to make some sacrifices to get this working."

Increased crude oil supplies forced the March contract to the mid-$30 range.  However, despite the added benefit in consumer discretional spending equity investors continue to focus on the fact that weak economic conditions are the cause of "cheap" oil.  Accordingly, confidence continues to erode along with spending.

We are sticking with yesterday's targets and support:

Major support in the S&P should be found near 800, as has been the case in recent months.  However, our earlier projection of 790 could be in the cards.  We see significant support in the Dow near 7800 but a close below may suggest a slide under 7500.  Support in the NASDAQ should be found near 1200, with 1133 as our S2.   

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.

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.