Stock Index Futures unch'ed ahead of payroll data

April 5, 2012

Click here to check out the latest Futures for You column in Stocks & Commodities Magazine, written by Carley Garner of DeCarley Trading!

Stock Index Futures unch'ed ahead of payroll data

The U.S. government will release its widely anticipated employment report to a miniscule audience.  Most traders will likely sleep through the announcement due early tomorrow morning rather than wake up to thinly traded markets and a limited time frame to react to the news.  Although the lack of market participation has the potential to wreak havoc in the event of a large miss in the headline figure, we doubt it will happen.  Instead, it seems more likely tomorrow morning will be a relative non-event ahead of a long weekend.

In yesterday's newsletter we mentioned S&P support in the mid 1380′s and that area held on Thursday.  Whether that continues to be the case will be highly dependent on the employment report.  Most traders are looking for 200,000 jobs added across both private and public sectors.  I believe that anything above 180,000 will be considered a positive.  The bears will likely need 150,000 or below to get some really downside spill pressure.

If you are a position trader, you are likely best off going into tomorrow's data flat the market.  Light volume and event risk make holding substantial positions nothing more than a crap shoot.  With that said, should there be a substantial rally tomorrow or early next week, traders might look to initiate bearish positions near 1424, and perhaps more aggressively near 1436.  We often see tax selling pressure in the second week of April; therefore, any sharp rally might be good for a short-term bearish trade.

If the report is a disappointment, we could see a slide into the mid 1360′s.  The chart says this might be a place for the bulls to step in, but we aren't willing to get comfortably bullish following the best quarter in a decade.

We aren't comfortable providing day trading support and resistance numbers ahead of a long weekend because a lot can change between now and Monday.  As always, if you have a trading account at DeCarley Trading, feel free to contact us on Monday for guidance.

* 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.

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

Please note: An e-mini S&P and e-mini NASDAQ chart are used because they better for charting purposes, but trade recommendations can be applied to either the full-sized S&P or the mini.  Unless otherwise noted, profit and loss will be based on the mini version.

Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade -

3-13- It was recommended that clients sell the May S&P 1450 calls for about $8.75 in premium or $437.50 per contract.

4-4 Clients were advised to buy back their May S&P 1450 calls for about $6.  This locks in a small profit of anywhere from $100 to $150 before transaction costs depending on fills.  We felt it was worthwhile to exit ahead of the payroll report to lighten risk exposure.

In other Markets…

3-26 It was recommended to clients that they sell the May 141 30-year bond calls and the May 133 puts for a combined premium of about 46 ticks or $718 before commissions and fees.

3-30 Clients were advised to buy back their short bond 133 puts (part of strangle above) at 7 ticks, to lock in a profit of about $280 per contract before commission (fill prices fluctuate slightly).

3-30 Clients were advised to offset their bond calls on the pullback at a price of about 17 ticks to lock in a small profit on this leg of the strangle, but a respectable $380 (approximately depending on fills and before transaction costs) when considering the profit on the call strike.

4-2 Clients were advised to sell June soybean 1570 call options for 8.5 to 8.0 cents.

4-4 Clients were advised to sell corn strangles.  Strikes and fills varied slightly (730/600 strangles for 14.5 cents, or 720/605 strangles for about 16.5 cents)

(Our clients receive short option trading ideas in other markets such as gold, crude oil, corn, soybeans, Euro, Yen, and more.  Email us for more information)

Carley Garner

Senior Analyst / Commodity Broker

DeCarley Trading

cgarner@DeCarleyTrading.com

1-866-790-TRADE

Local : 702-947-0701

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*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

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.

Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years.  There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year.  While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing.  Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results.  No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations.  No representation is being made that price patterns will recur in the future.