*All rights reserved.  Reproduction or distribution of this newsletter without prior consent is strictly prohibited.  

May 20, 2011

Check out the latest "Futures for You" column in Stocks & Commodities Magazine, click here to read!!

Stock indices "iffy" at these levels

Option expiration Friday in the stock indices and Treasuries, made for a relatively volatile intraday session.  Some of the weakness is being attributed to slides in clothing retailers that have suffered at the hands of a volatile cotton market but a more likely culprit is the fresh S&P downgrade of Greece debt.  It wasn't new, or unexpected, but the news seemed to give currency traders reason to begin dumping the euro again, and stocks quickly followed suit.  However, as is typically the case the initial panicked move later stabilized and losses in both markets were paired. 

In regards to clothing retailers, today's concern was centered primarily around GAP.  However, I question whether GAP truly is a barometer of the industry...unfortunately, they aren't at the top of the food chain like they used to be.  Their issues with higher cotton prices are probably more the result of deep discounts on merchandise due to lacking demand, than anything fundamentally wrong with the business.  Further, cotton prices have dropped sharply in recent months making this relatively old news. 

Yesterday's economic data was weak, but excitement over IPO (LinkedIn) and merger and acquisition news kept a floor under pricing.  Although the chart looks relatively neutral to bullish from this juncture...something doesn't seem right.  It seems as though the Euro is at risk of at least one more large slide to the 1.3900 area...if so, stocks could follow.  Accordingly, we will wait to see what plays out with the intention of possibly being bullish on a large slide (if it happens). 

If the slide occurs, support in the June S&P lies at 1316 and then again just under 1300.  If you are trading the Russell, it's a little trickier...levels are 812, 792 and 770ish.

If you are day trading, look for resistance in the S&P near 1346 and then again at 1352, support comes in 1330 and 1322.

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

Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini.  Unless otherwise noted, profit and loss will be based on the mini version.

Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -  

Flat

(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more.  Email us for more information)

*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.