August 25th, 2008
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Equities struggle to pick a direction ahead of Labor Day.
Investors are exercising stubbornness ahead of the end of the quarter on Holiday style volume. Many traders and locals look to have taken the entire week off ahead of the extended Labor Day weekend and it shows. Perhaps the market was destined for a decline in today's session but it is unlikely that we would have witnessed such magnitudes had it been an average volume trading day.
Sean Simko, head of fixed income management SEI Investments also blames large moves in the stock and bond markets on thin trade. He commented, "There's just too much uncertainty out there creating all this volatility. And what's adding to the volatility is we're entering this holiday period. The swings are exaggerated by the light volumes."
Much of the pessimism stemmed from worries over credit ratings of American International Group Inc., more commonly known as AIG. Shares of the financial giant suffered sharply on a credit Suisse analyst price target cut.
At the time that this report was bring written, all 30 of the Dow component stocks were in negative territory and 97 of the 100 NASDAQ 100 index were trading lower on the day. The day's losses erased Friday's surprise gains and then some.
Both the Dow and the S&P have been waffling around "mid-range" and have accordingly been very difficult to predict in terms of direction. Monday's action leaves the indices vulnerable to further declines; however, Friday's gains pointed toward higher prices. If you are as confused as I am, you should be on the sidelines. In theory, the September S&P should trade lower toward support at 1250 but I wouldn't put my money on it. With that said, if we see it I think that it would be a great opportunity to begin looking to get long with options, futures or both.
The NASDAQ hasn't completely failed to hold support but there is a clear sense of a struggle. A close below 1901 leaves the bears in control and should we see continued weakness the index may trade as low as 1813 in the coming weeks.
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 Futures and Options Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
Flat
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 Futures and Options 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 Recommendations
**There is unlimited risk in naked option selling and futures trading
Position Trade -
August 1 - If you took our advice, you would be long the September e-mini NASDAQ 1670 puts for about 20 points or $400.
August 12 - Not off to a great start, but things may begin to look better from here.
Carley Garner
Senior Analyst/Broker
DeCarley Trading
cgarner@DeCarleyTrading.com
1-866-790-TRADE
Local : 702-947-0701
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
