After an astonishing two-week rally that lifted the major indices approximately 11%, stock market bulls finally took a breather. Perhaps it has come to realization that the positive earnings have been posted on expense cuts rather than strong revenue figures. Nonetheless, the most recent round of earnings reports weren't as optimistic as those released last week. RadioShack Corp. beat analyst estimates (admittedly on cost-cutting) but Aetna Inc. and Honeywell International failed to meet expectations.
What may have been the glue to hold the markets together today, the Commerce Department reported that new home sales rose 11% in June to 384,000 figured on an annual basis. This is the strongest pace since November of 2008, but is still a historically low number. Don't forget that not too long ago this number was near 2 million. Also, sales seem to be the result of price discounts as opposed to a rebounding market. However, sales are trending higher...and this is better than the alternative.
A painful reminder that we are still in a recession, Verizon reported a 21 percent drop in earnings and announced that it plans to cut 8,000 jobs. Adding insult to injury, the firm's COO Denny Strigl stated, "We probably will not have large-scale hiring until we're out of the recession."
For those with extremely long-term views, there are glaring positives. In fact, Fed Chairman Ben Bernanke stated on Sunday that "The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments." He added, "People are adopting good habits, so not only will we be back on track, but the economy will be stronger than it had been before this started. However, if you are viewing the market with a much shorter horizon (as many futures traders do) it seems obvious that this rally has gotten a bit overheated. An "obviously" overbought market doesn't always translate into a correction as one would expect; the bottom line is that the market will do what it needs to do regardless of what you or I think that it should.
With that said, I think that the risk is in being long this market. In recent sessions the rally has been reduced to an annoying grind higher but will be facing significant resistance near the 988 area in the September S&P. In the meantime, even if the rally resumes the market seems vulnerable to a large one to two day pullback and I would hate to be on the wrong side of that. Of course, it is also uncomfortable to be on the wrong side of the rally and that (short covering) has been much of the catalyst for price gains. Even so, there are likely a lot of sell stops lining the downside, if the market cracks and stops are elected it could be a quick move.
Resistance in the S&P lies at 988 and then again near 1,000. Support, on the other hand, should be found near 961 then 940. We see strong resistance in the Dow near 9,163 with support at 8,950 and again at 8,755. NASDAQ traders may look for resistance at 1615 and first support near 1568.
* 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 -
July 22 - Buy cheap August S&P puts. We like the 880's and the 885's, you shouldn't pay more than $6.50
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
July 7th- We recommended to sell the August S&P 760 puts for $6.50 or better
• July 15 - We advised buying this option back for $2 or less, you should be out of this trade with a respectable profit. Don't let this option sit!
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
What may have been the glue to hold the markets together today, the Commerce Department reported that new home sales rose 11% in June to 384,000 figured on an annual basis. This is the strongest pace since November of 2008, but is still a historically low number. Don't forget that not too long ago this number was near 2 million. Also, sales seem to be the result of price discounts as opposed to a rebounding market. However, sales are trending higher...and this is better than the alternative.
A painful reminder that we are still in a recession, Verizon reported a 21 percent drop in earnings and announced that it plans to cut 8,000 jobs. Adding insult to injury, the firm's COO Denny Strigl stated, "We probably will not have large-scale hiring until we're out of the recession."
For those with extremely long-term views, there are glaring positives. In fact, Fed Chairman Ben Bernanke stated on Sunday that "The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments." He added, "People are adopting good habits, so not only will we be back on track, but the economy will be stronger than it had been before this started. However, if you are viewing the market with a much shorter horizon (as many futures traders do) it seems obvious that this rally has gotten a bit overheated. An "obviously" overbought market doesn't always translate into a correction as one would expect; the bottom line is that the market will do what it needs to do regardless of what you or I think that it should.
With that said, I think that the risk is in being long this market. In recent sessions the rally has been reduced to an annoying grind higher but will be facing significant resistance near the 988 area in the September S&P. In the meantime, even if the rally resumes the market seems vulnerable to a large one to two day pullback and I would hate to be on the wrong side of that. Of course, it is also uncomfortable to be on the wrong side of the rally and that (short covering) has been much of the catalyst for price gains. Even so, there are likely a lot of sell stops lining the downside, if the market cracks and stops are elected it could be a quick move.
Resistance in the S&P lies at 988 and then again near 1,000. Support, on the other hand, should be found near 961 then 940. We see strong resistance in the Dow near 9,163 with support at 8,950 and again at 8,755. NASDAQ traders may look for resistance at 1615 and first support near 1568.
* 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 -
July 22 - Buy cheap August S&P puts. We like the 880's and the 885's, you shouldn't pay more than $6.50
July 15 - We like selling the August 975 calls, fills ranged from $7 to $9 today.
July 7th- We recommended to sell the August S&P 760 puts for $6.50 or better
• July 15 - We advised buying this option back for $2 or less, you should be out of this trade with a respectable profit. Don't let this option sit!
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
