March 30th, 2009

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Stocks turn over despite the bandwagon

Just as the last of the timid bulls jumped back onto the bull market bandwagon, the equity markets flipped.  Unfortunately, markets have a cruel way of luring in the non-believers and then teaching them a tough lesson.  All along we had been calling for a correction and until Friday were standing relatively pat with our convictions. 

However, the strong futures market close on Friday enticed us to believe that there were a few more days left in the rally.  Accordingly, we recommended that those trading options with us liquidate with small profits, or at least lighten up, in hopes of a better entry this week.  Today, we are regretting the decision but are comfortable with the fact that we played it safe and feel as though it is necessary to be cautious in such uncertain market conditions.  I have learned that the best indicator in trading isn't an oscillator at all, it is instinct.  It isn't always going to be right, but seems to be more useful than any technical indicator that simply tells you where the market has been and not where it is going. 

It was a dreadfully slow news day, but things will begin picking up tomorrow.  There will be more discussion by the Obama administration regarding General Motors, the S&P/Case-Shiller index on housing (which has been a scrutinized sector) and the Senate Finance Committee will receive a six month update on TARP.  Later in the week we will be witnessing a G20 meeting and hearing the details of the latest employment report. 

After being given the opportunity to take a step back and re-evaluate the markets, it seems apparent that without a miraculous recovery in tomorrow's session on Washington events the markets should make their way lower.  After all, Wall Street isn't happy about the government's new role in the automaker bailout as there are some concerns about the Whitehouse having too much control over business.  On the other hand, bankruptcy options may or may not be any more appealing. 

The S&P should make its way to intermediate term support near 750.  Likewise,  7,180 will likely act as a magnet to the June Dow futures contract.  we are looking for the Russell to trade below 400 in the coming sessions with the first major area of support being 392.   

* 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.