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The Dow Futures Report

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Stocks Prove to be Resilient, but Monday Differ

Mon, Jul 21 2008, 15:38 GMT
by Carley Garner

Alaron

Earnings, options expiration, tame crude oil futures and oversold technical conditions have saved the stock indices this time around but many are wondering if a retest of the lows is imminent. Despite being a bull at heart, I see significant resistance in all of the major indices. While the Dow seems to be trading above (and holding) my original target, the S&P and the NASDAQ aren’t sharing the same technical success. This isn’t a surprising phenomenon given the fact that the Dow was the index that led equities lower.

The story of the day was Citigroup earnings which posted a large loss but still managed to beat expectations. According to assets, Citigroup is the nations largest banking company lost $2.5 billion dollars, or the equivalent of 54 cents per share, in the second quarter. Most analysts were looking for losses of closer to 66 cents per share.

Trading in crude oil futures remained highly volatile but still managed to end the day on a quiet note. For once, energy market action didn’t seem to be the primary driver of stocks.

We are officially in the midst of what is commonly referred to as the “summer doldrums”. Despite large trading volume in stock index futures in light of the recent volatility, it seems like option traders have taken to the sidelines…or at least that is what I am being told from some floor brokers.

I would prefer to see higher trade first thing Monday morning, but the market’s tone doesn’t seem to be overly bullish. Those short puts as recommended in this newsletter shouldn’t take any action. Things are looking promising in terms of premium erosion.

Sorry that today’s commentary was so short, have a great weekend!

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 18th - I recommended selling the July Dow (big or mini) 11,000 puts for 50 ob
• * Place an order to buy this option back for 10 ticks or better
• * July 14th – Clients were instructed to roll out the position by buying back the July 11,000 near 100 points and selling the August 10,500 put for a credit of about 130. If you haven’t done this, it is likely a good idea to do so. Contact me if you have questions.

• · June 27th - Buy 1 September 109 put and sell 2 103 puts, this can be done near even money. The trade makes something with the market anywhere between 10,900 and 9,700 at expiration with the max benefit being at 10,300 ($3000 in the mini and twice that much for the big). The risk is unlimited below 9,700!

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, traderecommendations 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  Mon, Jul 21 2008, 15:43 GMT