December 2009 Archives

A narrowing trade deficit helped stocks forge gains in light volume trading. According to the Commerce Department, a large surge in exports (likely due to a cheap dollar) helped narrow the trade deficit in October to $32.9 billion. However, isn't this why the stock market has been rallying anyway?

Like it or not, the market is probably going higher from here. I doubt that the buying pressure will come from fresh bulls, but the shorts caught on the wrong side (again) might start to feel the squeeze. That said...I wouldn't be the farm on any trade or speculation. From my conversations with others in the industry, many have already opted to take the rest of the year off. December markets can be dangerous and for those that have had a good year, it doesn't make sense to take on unnecessary risk.
If you like a lottery ticket play, we still like our idea from yesterday:

I am normally not one to recommend option buying, but if you are the type that can't stand being on the sidelines...this might be an opportune time to be long options. The sideways action has eroded premium on both sides but we like the idea of buying the December 1115 calls for about $5 in premium. It is a lottery ticket, but if the shorts are squeezed hard enough it could pay off well.

The lack of news and market action has left us with little to talk about. We are sticking with the same calls:

We see near-term support in the S&P near 1082 then again at 1076, as long as these levels hold there is a chance for a Santa Claus rally. That said, the markets seem vulnerable to a large correction but we think that will come in early 2010. NASDAQ support lies at 1755 then again at 1725.

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

Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701

www.CarleyGarnerTrading.com
www.DeCarleyTrading.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.

U.S. Debt Review and Outlook

US TREASURIES regain some ground from last week's plummet, as dovish comments from Fed Chairman Bernanke prompted some short covering ahead of the first of three Treasury auctions this week.

A lack of fresh data to begin the trading week turned additional focus to comments from Federal Reserve Chairman Bernanke. Speaking at the Economic Club in Washington D.C, the chairman stated that the economy continues to face "formidable headwinds" in the form of sustained job losses and continued tightness of credit to borrowers at the consumer level. Based on this outlook, the chairman proposed that the pressure of higher interest rates and inflation going into 2010 would be moderate at best. Additional monetary support for US debt recovery stemmed from Chinese comments that the country would continue to support a strong pro growth policy.

Proportionally, the short end of the yield curve gained the most as traders expected a reasonable "out of the box" reception for the US 3 year note auction ($40 Billion)

Technically, March 30 year futures rebounded off support level hit in early November. Monday's rate of correction appears in line with expectation. Resistance based on short term rebound looks to find strong resistance at 119-24. Downside sentiment remains in place, with next downside target setting up at 118-04

U.S. Equity Review and Outlook

US EQUITIES traded mixed to slightly lower on Monday, as a lack of follow through from Friday's optimistic payroll number kept a subdued sentiment on equity trading. Initial support for stocks came from news that China would maintain a "pro-active" fiscal policy throughout 2010, while keeping its monetary policy accommodative. The outlook also put some pressure on the US dollar, giving back some of its gains from late last week. The Dollar then reverses back toward positive territory after traders digested Fed Chairman Bernanke's comments on likely ongoing and future headwinds for the economy going into 2010.

Telecom stocks were the best performing sector, led by strong outlook for Sprint Nextel and RIM. Early gains in credit card issuers eroded, after Bank of America posted a buy recommendation on the sector, citing improvement for earnings as the economy improves and fees/interest rate increases contribute to revenue growth. Obviously, the Fed Chairman's comments failed to inspire those stocks any further.

Technically, little has changed for December S&P futures have hit a double top in the 1113.00 range. Market appears ready to test downside of range at 1093.00, with 1084.50 setting up as a support. A break of this level could lead market further down the Fibonacci path to 1073.00. Resistance remains near 1113.00, as there has been no significant hold above this level. Should this level give way, upside targets for the contract set up at 1118.50 and 1122.50. A pattern of slightly higher highs could spur technicians to consider a strong push to try and hit high target for year of 1125.00.

Prepared by Rich Roscelli & Paul Brittain.

PLEASE EMAIL QUESTIONS OR COMMENTS TO RICH@BINVSTGRP.COM

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. Commodity Trading School, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. 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.

According to the Fed's Beige Book, "economic conditions have generally improved". Unfortunately for traders, the stock market's reaction was nearly as bland as the news. It is hard to determine whether the equity markets failure to move higher is bearish or failure to move lower is bullish. One thing is for sure, the major indices are stuck in a rut.

As expected, the Fed's take on the economy showed a struggling job market but they did point out a few diamonds in the rough. In the Boston region, firms were beginning to hire and reverse pay cuts and in St. Louis the service sector expanded. Nonetheless, just last week the Fed claimed that it could take as much as five or six years for the employment picture to be back to "normal".

All eyes are on Friday's employment report but this morning the market got a glimpse of what might be on the horizon. Payroll firm, ADP, released their predictions of the government numbers. They believe that the U.S. economy lost about 169k jobs in November. If they are right, the number will be a slight disappointment but based on the fact that it is an improvement from last month and the market has already been warned (thanks to ADP), such a reading might be seen as temporarily supportive for equities.

We are sticking to yesterdays forecast:

"based on our chart work a continuation of the short squeeze could put the December S&P near 1130 in the coming sessions. This equates to 1840 in the December NASDAQ futures and about 625 in the Russell. However, we will be bearish at these levels!"