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The Dow Futures Report

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Mixed Bag in Equities

Mon, May 19 2008, 14:07 GMT
by Carley Garner

Alaron

**Be sure to see my monthly column “Futures for You” in Stocks and Commodities!!!

It was an overall bearish day for stock trade, but the selling pressure was muted and that may signal that there is still some room for this market to move on the upside. The catalyst to early morning selling pressure was a staggering rally in the crude pit.

I think that most agree that crude prices have taken on a life of their own. Supply and demand fundamentals don’t seems to necessarily matter as speculation has created a “fear” premium in current pricing. Whether or not that premium can be justified is debatable and irrelevant, but in the meantime the economy can and likely will suffer greatly from the implications. The front month futures contract rallied to $127.82 to post yet another record high. Let’s face it, this can’t go on forever but unfortunately it could extend beyond what a year ago would be our wildest dreams. Estimates as to the where the high will come in range from $140 to $200.

Today’s mixed news leaves investors with a lot of uncertainty. Steve Neimeth, portfolio manager for AIG SunAmerica Mutual Funds believes that the energy rally has drained some of the market optimism. “Although the housing numbers today were generally positive, the Michigan survey was quite poor and, more importantly, a continued spike in energy and commodities are causing investors to second-guess the second-half recovery.” He added, “If oil and gas prices continue to go up, consumers are unlikely to have the spending ability in the second half.”

The major indices look to have begun to overextend themselves; the dow-trading team, a dot com signal provider, is often bearish and this isn’t an exception. Although they are mechanical day traders and have recently undertaken a completely automated trading strategy, they are known for having strong fundamental opinions in regards to the U.S. economy and the markets. They point to heavy resistance at 13,000 and see support at 12,650. Their pessimism stems from a belief that the market has surpassed fundamentals and the Fed will likely be ending their rate cut campaign.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.

Dow Recommendations...

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

Position Trade – Sell 1 Dow 135 call for 50 or better (this can be done with the mini contract)

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 Recommendation

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

Position Trade –

May 15 – Had you followed my recommendation you would be short a mini future from 2035…no stops recommended for now.

Published on  Mon, May 19 2008, 14:07 GMT