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The Dow Futures Report

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Crude Oil Trumps Durable Goods

Thu, May 29 2008, 14:50 GMT
by Carley Garner

Alaron

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

The major stock indices failed to hold early morning gains following a reversal in crude oil. Crude prices entered the day in a tailspin, but quickly found buying interest after reaching a low of just under $126 per barrel. Speculators bid the price of crude nearly $6 off of the low.

Economic news has been relatively positive in recent days but equities haven’t really been able to benefit. Today’s early morning rally was cut short despite a good reading on durable goods. Orders to U.S. factories for big-ticket items excluding autos and airplanes increased by 2.5%; this was the largest gain in nine months. Some economists claim that the momentum in manufacturing may be crucial in avoiding a full blown recession. According to Joal Naroff, chief economist at Naroff EconomicAdvisors, “The economy is soft, but with demand for big-ticket items holding in there, a sharp slowdown does not seem to be in the works.”

The downside may not be over; I still like selling puts against additional weakness. With that said, there seems to be a little too much bearish sentiment surrounding stocks for the market to completely break down but anything is possible. It seems to me that we are destined for a retest of the Friday low. If I am right, the 11,700 seem attractive if you can sell them at or near 50 points.

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 –

May 27th - I am recommending that my clients work orders to sell June Dow 117 puts for 50 points or better. This can be done with either a mini or full sized contract. Contact me if you have questions.
May 19th – If you followed my recommendation you would have sold the Dow 135 call today for 50 or better (this can be done with the mini contract).

• · May 20th – Buy this option back for 10 ticks or better to take a quick profit.
• o May 21st – You should have been filled today at 10 points, this is a profit of $200 on the mini and $400 on the full sized contract before commissions and fees!!

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. So far so good...call me for guidance.

• · May 20 – You may have opted to liquidate this position on the spike low today, but if you are still in put a limit order to take a profit at 1977 and a stop order at 2016 to lock in a profit.
• o May 21st – If you placed a stop at 2016 you would have been liquidated before the drop. Depressing, but still profitable by about $380 before commissions and fees!!

Published on  Thu, May 29 2008, 14:55 GMT