June 22nd, 2009

"Commodity Options" is now available at TradersLibrary.com!

Optimism wanes on Wall Street

Sharp selling in the commodity markets forced stock investors to reconsider their positions.  Crude oil tumbled over $3 per barrel at one point on Monday after the World Bank reported that they expect the global economy to shrink by 2.9% this year.  In March, the organization believed that the economy would shrink at a pace of 1.7%.  The World Bank also stated that it believed that global trade would plunge by 9.7% in 2009.  The waned confidence quickly dominated trade in stock index futures and once the tone was set, there was no going back. 

According to Peter Cardillo of Avalon Partners Inc., "Stock investors want to see stability in commodity prices, not a surge or a tumble."  The logic being that sharp rise, although suggests confidence in the economy, has the potential to pinch consumers.  On the other hand, a sharp drop in commodity prices suggests weak global demand and more importantly expectations for a sluggish recovery.  He added, "You need a balancing act within the commodity markets."  Clearly, today's commodity trade was highly imbalanced.  Along with plunging crude prices, soybean futures dropped by about a quarter per bushel on the session and silver fell nearly half of a buck. 

The recent pullback in equities was long overdue.  Last week's negative showing was the first of its kind in over a month.  Price digestion is imperative for a healthy bull.  That said, we don't think that the selling is over.  As mentioned in last week's newsletter, we think that the S&P could be headed toward the mid-to-high 870's but keep in mind that if investors begin to panic, the liquidation could result in a quick move to the mid 800's.  For now, we are planning on being bullish near 875. 

We see support in the Russell near 485 but think that we will see the low 470's again at some point this week or next.  The once resilient NASDAQ seems destined for 1401. 

* 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.  Charts provided by Track 'n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

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

Russell 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.