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The Dow Futures Report

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Stocks Higher, but Resistance Looms

Fri, May 30 2008, 10:43 GMT
by Carley Garner

Alaron

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

Equities enjoyed another day of gains following a decent showing in the preliminary GDP numbers, crumbling crude oil prices and smashed bonds. Keep in mind that the volume has been incredibly light and according to DT Trading on the S&P floor the lack of volume seems to support the upside drift.

According to the Commerce Department, the economy grew at an annual rate of .9%, above consensus estimates of .6% and the fourth quarter reading. The news is somewhat promising in that the U.S. economy may be able to avoid a full blown recession, or at least see a soft landing. I can’t stress enough that the economy and the stock market aren’t necessarily correlated. Remember, the stock market has always ended a recession higher than it began.

At this juncture it is difficult to pick a direction. The broader S&P index has rallied above and beyond its 20 day moving average but the Dow failed to reach it at 12,795. However, the difficulty of the market to hold early gains tells me that Friday may be a down day. Perhaps the so called mutual fund buying has exhausted itself and we are in store for a move to 12,420. I am indifferent to the direction from here and am awaiting an opportunity to trade.

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 29th – We may have missed this trade, but will continue to try if we see a sell-off soon.

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  Fri, May 30 2008, 10:54 GMT