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The Dow Futures Report

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Stop Running (in both directions) Dominated Trade

Tue, Jun 10 2008, 07:30 GMT
by Carley Garner

Alaron

**I was recently interviewed by Stock Shotz!! Visit YouTube.com and search Carley Garner Stock Shotz to listen.

Stocks enjoyed a dead-cat bounce following Friday’s bloodletting but as the day wore on so did the buying interest. Weaker crude oil and better than expected news on the housing front was enough to spark a short term bounce, but bearish sentiment seems high…maybe even too high. Today’s failure to hold gains suggests that this pullback may extend losses in the Dow to 12,150.

News of Lehman Brothers’ massive second quarter write-offs are forcing the firm to raise another $6 billion dollars in order to avoid Bear Stearns style insolvency didn’t sit lightly with investors. Lehman is expected to post losses of nearly $3 billion for the second quarter. Keep in mind that Lehman is the nation’s fourth largest investment bank.

Oil and gas prices remain a focus of many investors and traders. Crude oil relaxed to the tune of about $4 on the Monday following the largest single day crude rally in history. However, the day’s plunge still leaves prices near $135, a very uncomfortable level. Unless you have been riding a bike or utilizing public transportation, you are likely aware of the fact that the national average price of gas paid at the pump is now above $4 per gallon. The difference between $3.90 and $4.00 is minimal in terms of its impact on the economy but the psychological effects may be large and it is often sentiment that moves the market as opposed to reality.

The major indices are all a bit oversold and the Nasdaq futures are near the bottom of the trading channel. Under normal market conditions I would be looking at this as a buying opportunity, however the price action seems to be a bit suspect. I prefer to patiently wait on the sideline. If you are currently short the 118 puts as mentioned below, don’t make any moves this is still a great 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 –

• * June 3rd - Sell the Dow (big or mini) 118 put for 50 points or more
  
• * June 6th - Despite the recommendation in the previous report, my clients were not advised to place an order to sell the June 118 puts for 50 or better. Instead we will wait until Monday in hopes of a clearer picture. If you were filled on this order don’t panic, I still feel that it will work out. Contact me for guidance.
  

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 10 2008, 07:47 GMT