Carley Garner's  Instablog

January 13, 2012

Click here to read Carley's latest Stocks & Commodities Magazine column on the realities of the forbidden word (commission).

News of more credit rating downgrades plagued risky assets and gave investors a reason to put money back into the safe-haven of Treasury securities.  Although bonds and notes were up measurably on the session, we could have easily seen much more panic.  Not because the ratings cut was a surprise, but because of the timing of the announcement (ahead of a three day weekend in the U.S.).  One has to question the S&P's timing (once again).

Standard & Poor's actions to downgrade a handful of European sovereigns was well telegraphed but they must know that the lack of access to the markets on Monday (Martin Luther King Day) has the potential to cause unnecessary stress, and possibly panicked trading.   In light of the holiday, the trading pits in downtown Chicago will be closed on Monday but the electronic Globex markets will be open from Sunday night through Monday morning for an abbreviated and likely sparsely attended, session. 

In addition to the S&P announcement, the Treasury rally has been supported by this week's Fed speeches.  Most Fed members seem to be maintaining a dovish stance and this keeps the door open for even more QE stimulus (and therefore potentially lower yields). 

A recent Italian bond offering at a lower than expected yeild but questionable demand provided temporary relief to selling in the Euro and might have been enough to send bonds reeling in the absence of the credit downgrade.  Nonetheless, the technicals are strong and the rally appears to be gaining steam. 

In this newsletter we've been patiently waiting for a rally to take us to the 132ish area in the note and to the 146/147 area in the long bond.  Specifically, we are currently looking for the March 10-year note to make its way into the mid 132's and the bond should see the mid to high 146's or maybe even a bit over 147.  However, we'll likely start to lean lower from there.  For those that like to sell options, we are hoping volatility increase enough to be able to get some of the March calls off at strikes in excess of 153 with respectable premium.

* 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.  

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

Treasury Bond and Note Option and Futures Trading Recommendations

**There is unlimited risk in naked option selling.

Flat 

12-29 - Clients were advised to sell the March crude 122 call and the 78 put for a combined premium of about $1,000. These options have 49 days to expiration and we believe time value erosion will be most noticeable from 45 to 28 days. 

1-3 - Clients were recommended to sell the February S&P 1340 calls for about $8.00 ($400 in the mini contract).  We are looking for the market to digest or pullback its recent rally...but prefer to give it room to breathe. 

1-3 - Clients were advised to sell the February 123/136.50 Euro strangles for about $700 in premium (56 ticks).  These options have 32 days to expiration and are vulnerable to accelerated premium erosion in the absence of a significant change in market fundamentals.

1-5- Clients were advised to buy back the short 136.50 calls in the Euro for about 10 ticks to lock in a quick profit ranging from $200 to $240 (depending on fill prices on the way in and out).  We'll look for a place to buy backthe put in the coming days. 

1-6- Clients were advised to sell February Euro 117 puts for about 40 ticks ($500)

1-9- Clients were advised to take a profit on the March crude oil 78/122 strangles.  Most clients netted between $400 and $450 per lot. 

1-10 Clients were recommended to buy back the march Euro 117 puts near 21 to lock in a profit of about $230 before commissions and fees.

1-11 Clients were advised to sell the Euro 118 puts for 33 ticks or $412.50.

(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)

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701

http://twitter.com/carleygarner

http://www.linkedin.com/in/carleygarner

http://www.DeCarleyTrading.com

http://www.ATradersFirstBookonCommodities.com

*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. 

January 5, 2012

Part 2 of our discussion on the COT Report in Stocks & Commodities Magazine: http://traders.com/index.php/sac-magazine/current-contents/q-a-a/futures-for-you/873-cot-reportable-or-non

Say what you want about Warren Buffet, but there are two facts that can't be argued:

1.  He has made more money in his lifetime than most (or all?) of his critics combined.

2.  The man has a great sense of humor.  I've quoted him countless times throughout my books and newsletters and it never gets old (at least to me it doesn't).  I thought you might enjoy this, I know I did (he is the one dressed as Axl Rose) : http://www.youtube.com/watch?v=V5oYYjJihh4 

Stocks posted another day of no progress as intraday volatility eventually settled near unchanged on the session.  It appears as though shorts second guessed their stance following ADP's prediction of 325,000 new jobs and spent the remainder of the day covering positions. 

Don't forget that Martin Luther King day is quickly approaching (January 16th).  The market seems to have a bit of a curse going into the holiday and particularly on  the holiday itself (futures are open but cash market closed).  Accordingly, we favor the idea of selling rallies for now. 

We've mentioned in this newsletter before that when a market is trading at a relative extreme (as measured by the current trading range) going into a large announcement, it often sets the stage for a trend reversal (or at least temporary corrective trade). 

The S&P appears to be ripe for such a price pattern.  We are currently near the highest price seen since October and are pressing up against levels that have acted as significant resistance areas.  Translation:  buy stops above.  If tomorrow's non-farm payroll report shows a figure near or above 200,000 jobs added (both private and public) we could easily see stop propelled rally.   If see, this could offer the bears a chance to get in at relatively low risk levels (extended pricing near resistance).  We are looking for resistance near 1286 and then again near 1295ish...if you are a bear, be ready to act at or near these levels. 

* 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.  

**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 -

1-3 - Clients were recommended to sell the February S&P 1340 calls for about $8.00 ($400 in the mini contract).  We are looking for the market to digest or pullback its recent rally...but prefer to give it room to breathe. 

In other Markets...

12-29 - Clients were advised to sell the March crude 122 call and the 78 put for a combined premium of about $1,000.  These options have 49 days to expiration and we believe time value erosion will be most noticeable from 45 to 28 days. 

1-3 - Clients were advised to sell the February 123/136.50 Euro strangles for about $700 in premium (56 ticks).  These options have 32 days to expiration and are vulnerable to accelerated premium erosion in the absence of a significant change in market fundamentals.

1-5- Clients were advised to buy back the short 136.50 calls in the Euro for about 10 ticks to lock in a quick profit ranging from $200 to $240 (depending on fill prices on the way in and out).  We'll look for a place to buy back the put in the coming days. 

(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)

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701

http://www.facebook.com/decarleytradingcommoditybroker

http://twitter.com/carleygarner

http://www.linkedin.com/in/carleygarner

http://www.DeCarleyTrading.com

http://www.ATradersFirstBookonCommodities.com

*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. 

January 5, 2012

Part 2 of our discussion on the COT Report in Stocks & Commodities Magazine: http://traders.com/index.php/sac-magazine/current-contents/q-a-a/futures-for-you/873-cot-reportable-or-non

Say what you want about Warren Buffet, but there are two facts that can't be argued:

1.  He has made more money in his lifetime than most (or all?) of his critics combined.

2.  The man has a great sense of humor.  I've quoted him countless times throughout my books and newsletters and it never gets old (at least to me it doesn't).  I thought you might enjoy this, I know I did (he is the one dressed as Axl Rose) : http://www.youtube.com/watch?v=V5oYYjJihh4 

Treasury futures waffled on both sides of unchanged as traders appeared to be squaring up risk ahead of tomorrow's session.  In addition, a volatile session in stocks and a continuation of the never-ending European influence left the market with a mixed bag of fundamentals. 

Overnight trade saw a significant amount of flight to quality bidding in bonds and notes; and "risk off" allocation in risky assets.  In our belief, had it not been for a shockingly optimistic ADP guesstimate of the U.S. employment report, the day might have ended much differently.  In other words, stocks much lower and bonds much higher...after all, that is what the technical set-up was suggesting.  Nonetheless, failure for Treasuries to hold this morning's gains leaves the bulls vulnerable but it isn't easy being a bear either.  At this point, the best trade is likely on the sidelines in hopes of some sort of resolution to this pattern following the employment report. 

Consensus estimates are looking for the unemployment rate to tick higher to 8.6% (but don't forget the number is bogus due to discouraged job seekers dropping out of the hunt).  Most are also looking for non-farm payrolls to be 160,000, with private being somewhere in the 200,000 range.  However, this morning ADP boldly predicted 325,000 private jobs added so there is definitely some question markets going into the report. 

ADP's accuracy is in question, but if they are remotely correct we'll likely see a temporary rally in equities and pressure on Treasuries.  We recommend heading into the report flat, but have an inclination to fade the knee jerk reaction.  For instance, if things go how we think they might (stocks higher, bonds lower) just before or after the announcement, it might  be possible to be short-term bullish bonds and notes from support areas (mid to low 129's in the 10-year note and mid to low 140's in the long bond).  If we get the opposite reaction, look to begin getting intermediate term bearish near 147 in the 30-year bond and about 132 in notes.  Let's see what tomorrow brings. 

* 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.  

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

Treasury Bond and Note Option and Futures Trading Recommendations

**There is unlimited risk in naked option selling.

Flat 

12-29 - Clients were advised to sell the March crude 122 call and the 78 put for a combined premium of about $1,000. These options have 49 days to expiration and we believe time value erosion will be most noticeable from 45 to 28 days. 

1-3 - Clients were recommended to sell the February S&P 1340 calls for about $8.00 ($400 in the mini contract).  We are looking for the market to digest or pullback its recent rally...but prefer to give it room to breathe. 

1-3 - Clients were advised to sell the February 123/136.50 Euro strangles for about $700 in premium (56 ticks).  These options have 32 days to expiration and are vulnerable to accelerated premium erosion in the absence of a significant change in market fundamentals.

1-5- Clients were advised to buy back the short 136.50 calls in the Euro for about 10 ticks to lock in a quick profit ranging from $200 to $240 (depending on fill prices on the way in and out).  We'll look for a place to buy backthe put in the coming days.   

(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)

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701

http://twitter.com/carleygarner

http://www.linkedin.com/in/carleygarner

http://www.DeCarleyTrading.com

http://www.ATradersFirstBookonCommodities.com

*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.