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The Stock Index Report

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Stocks pause, yawn....

Sat, Oct 17 2009, 00:31 GMT
by Carley Garner

DeCarley Trading

Stocks traded moderately lower on lackluster earnings and mixed economic data. Bank of America reported a loss of $2 billion, sending a reminder to investors that improvements don't necessarily mean cured.

The University of Michigan's consumer sentiment index fell to 69.4 after posting 73.5 in the month of September. The sharp downturn doesn't bode well for the ability of consumers to pick up the slack. In a similar theme, GE reported weak profits last quarter due to losses in its business loan division.

Stocks and crude have been able to travel higher together in recent months but if crude continues at this pace that might quickly change. The market's perception of higher crude has been that it is a positive indication that demand for energy, and thus the health of the economy, is on the rise. However, as crude gets more and more expensive we will eventually reach a point in which the consumption pinch due to higher energy costs will be back in the spotlight. That said, we happen to be bearish crude at these levels. There seems to be a massive short squeeze in effect but it might not last.

Stocks were under pressure on Friday but the selling was muted. The lack of directly might be the result of option expiration but it is unclear as to whether expiration artificially held stocks up or if it prevented further gains. Monday's trade should provide a clearer picture. For now, we can't help but lean lower but realize that our upside targets in the NASDAQ wasn't quite achieved and therefore there may be slightly more buying ahead of the correction. Nonetheless, we feel as though the risk is in being long this market for now. Here is a similar prediction made by some of our friends on the floor with DT Trading http://www.youtube.com/watch?v=lVTpvR0fCEY. DT is a specialist that we use the one CME floor to execute open outcry positions for our clients and they have always had a knack for the markets as well as the ability to provide efficient fills.

In yesterday's newsletter we mentioned resistance at 1095 but thought that the S&P would kiss 1100. The overnight high was 1095...and it was downhill from there. We still see resistance in the NASDAQ at 1075 and in the Russell at 626.
If we are right, our first downside objectives are 1060, 1714 and 605 respectively.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.

**Seasonality is already be factored into current prices, any references to such does not indicate future market action.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.


S&P 500 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

October 14 - Our clients were recommended to sell calls against today's equity market strength. Fills on the November 1135's were coming in near 7.50 and some sold the 1040's at 7.25. We feel as though the market might move a little higher in the near-term but like the prospects over the next week or two.


Russell Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading


Position Trade -

Flat

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 Futures and Options Trading Recommendations
**There is unlimited risk in naked option selling and futures trading

Position Trade -

Flat

Published on  Sat, Oct 17 2009, 00:36 GMT