The Dow / Nasdaq Report by Carley Garner
Stock Index Report
by Carley Garner
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2008-07-02
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July 2nd, 2008
**Check out my latest column, Futures for You, in Stocks and Commodities Magazine
The bulls should have stayed in bed this morning. After a short lived bounce, equities gave way to selling pressure as traders seem to be fixated on the “sell all rallies” mentality. Until there is reason for this to change, stocks will continue to struggle. Perhaps tomorrow’s employment data will be enough to either change the market psychology or at least trigger the large masses of buy stops that are likely lined up in the major indices.
Based on today’s trade, a short covering rally could bring the Dow as high as 11,900 and the Nasdaq to 1940. Please note use of the word could. If the payroll data fails to spark enough of a rally to break the downside momentum (AKA run buy stops), the correction may be on hold for now.
Consensus estimates are calling for a draw of 50k jobs but ADP’s numbers released this morning predict a draw of about 79k. It seems fair to say that the major stock indices have priced in dismal numbers, leaving expectations relatively attainable. Should we see a report in line with analysts’ estimates it may be equity supportive; likewise, a better than expected number may be what this market needs to begin the imminent short covering rally.
If you haven’t already, this is a great time to be selling puts….if you have the guts. The implied volatility is high and this translates into higher premiums but also entails higher risk. Contact me for ideas.
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 to sell the Dow (big or mini) 11,000 puts for 50 or better.
o Place an order to buy this option back for 10 ticks or better
· 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, trade recommendations will denote whether a mini or full sized contract should
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| Meet the Author |
Carley Garner
Senior Analyst and Broker; Stocks and Commodities Magazine columnist; Author of “Commodity Options” to be published in early-2009 by FT Press a division of Prentice Hall.
Stock Index Report has contributed 101 issues.
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