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The Dow Futures Report

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Stocks Suffer on Light Volume

Tue, Jun 3 2008, 12:37 GMT
by Carley Garner

Alaron

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

It was a rough day for equity bulls, but I think that many saw this coming. Today’s weakness brought the Dow back to the lows of last week, while broader based indices such as the S&P have yet to reach those lows but seem to be well on the way. Perhaps the selling will subside from here, but I am counting on weaker prices as the week progresses.

Much of the selling was sparked by “shake-ups” at two major banks. The chief executive officer of Wachovia Corporation, Ken Thompson, was forced out of the firm. Thompson was the third CEO of a major U.S. financial institution to reach unemployment status following the credit crisis. Likewise, Kerry Killinger, was demoted as the chairman of Washington Mutual Inc.

Many investors were discouraged by the market’s failure to break resistance on the recent recovery from the lows. Richard Sparks, senior equity analyst at Schaeffer’s Investment Research in Cincinatti points out that that the S&P has had difficulty breaking through 1400 on the upside. Regarding today’s action he said, “There’s just no big catalyst on the horizon to get the market up and over that hurdle…It seems to me like one of those dreary Mondays without any positive news out there.”

Given the lack of economic news, crude oil was likely in the forefront in the minds of investors. Rumors of a soon to be U.S. attack of Iran, crude oil forged a reversal which resulted in a rally of over $4 per barrel from the early low.

Today’s trade may have been just what the bears needed to take control of this market in the near term. I suspect that we may have another day or two of backing and filling. Depending on volatility levels, it may be an opportunity to sell put options against a down-move.

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.

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 –

Flat

Published on  Tue, Jun 3 2008, 12:43 GMT