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October 15th, 2010
Tech stocks keep stock index futures afloat
If it weren't for the resiliency of the NASDAQ, or maybe we should just rename the index "Apple and Co." stocks might not have fared so well today. Early morning buying was met with vicious selling that brought the S&P 17 handles off the high in a short period of time. Also working in favor of the bulls, the Fed kicked off their newly released schedule of POMO (Permanent Open Market Operations) buying and traders know there is another round on Monday.
The daily and weekly charts look ripe for a surprise pullback, but this has been the case for weeks now and the market just hasn't delivered. We aren't in the camp that thinks this is an incredible shorting opportunity, but we do feel the odds favor a moderate pullback. That said, a healthy correction should be a great place to be a buyer.
It is too early to tell whether today's Dollar stability is the start of something more, or simply end of the week squaring...although, we would like to believe the lows are in. If this assumption is right, stocks could struggle to hold footing. We have thought this before, but eventually we will have to be right. About two thirds of the dollar index is made of the Euro, and it is hard to imagine the same currency that was plagued with Greek debt woes can be that much more attractive than the greenback. The trade is officially overcrowded, and when the bus finally runs out of gas the re-pricing could be fierce (at least in the short-term).
Earlier this week, we noted stock index futures buying by traders that were simply hedging short call positions that were deeply underwater. As we have learned over and over again, the markets tend to cause the most pain to the most amount of people and nothing would hurt the bears that have thrown in the towel more than a good ol' fashioned post-expiration sell-off.
Chasing the market lower isn't a good idea, but if you can catch un upswing into resistance in the mid 1180's in the December S&P futures (713) in the Russell...it might be a good place to consider looking lower.
We still like the idea of buying lottery ticket puts in November options with strikes near 1100. The market seems a bit complacent in the short-term, and this opens the door for a good correction. On the other hand, being overly bearish could be dangerous...so if you are a bear, give yourself room for error and be quick to take winners off the table.
* 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 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 -
October 6 - Clients were advised to sell the November S&P 1215 calls for about $8, fills ranged from $7.50 to $8.00.
Senior Analyst / Commodity Broker
Local : 702-947-0701
*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.