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January 28th, 2011
Stock index futures tumble as Egypt riots
The stock index bears have been patiently waiting for the bulls to have a reason to lock in profits and the Egypt riots seemed to be a good excuse for action. Similar to the Greece riots, business news stations did a great job at flashing horror across television sets across the nation. Accordingly, moderately panicked selling began flowing in.
Today wasn't the first day of protesting in Egypt, but it was the day the media and the markets chose to pay attention. The truth is, the market has been overdone for quite some time and as we have been noting, due for a correction. Sometimes it just takes a catalyst to get the ball rolling.
Aside from riots in Egypt, the day's news was overall bullish for equities but that didn't seem to matter. GDP was an impressive, but beneath estimates, 3.2% and the final read of consumer confidence was reported to be a better than expected 74.2.
In the overall scheme of things, unrest in Egypt probably isn't the end of the world for the financial markets. In other words, although significant, today's reaction was likely a little overdone. That said, the reaction probably isn't over either there could be plenty of panic ahead and with scared trade comes opportunity.
The market had simply become too complacent (bullish) and it was time for a wakeup call. We are looking for a little more cold water to be splashed on the face of perma-bulls. The March S&P futures face moderate support near 1267 but we think the next overall downside target will be about 1250. The NASDAQ and the Russell seem to be back on track for the bears. The first downside targets will be 2230 and the mid to low 760's.
* 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.
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*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
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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.