Plenty of volatility, little progress
June 22, 2012
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Plenty of volatility, little progress
Thursday's perfect storm of selling found some reprieve on Friday on news of a coordinated economic recovery “plan” in the Eurozone. The plan comes with a hefty price tag and eliminates some of the uncertainty going into next week's EU summit. It is also likely that much of the buying going into the weekend was done by shorts locking in profits, or those that sold too late cutting losses.
Between Thursday's weak economic data in the U.S. and China and Moody's bank downgrades, the bears had a field day. Nonetheless, after having a day to think things over some analysts (and apparently traders) are discrediting the credit downgrades. Not only was this move well known before it actually took place, but it is difficult to justify the premise that banks are worse off now than they were during the credit crisis. Either ratings were too high in the past or are too low now.
It might not seem like it, but the S&P has traded in a 50 handle range for over two weeks. Within that range we've seen multiple 1% moves in each direction, and of course yesterday's 2.4% bludgeoning. This is a market in a clear state of confusion.
The chart is technically neutral but it probably won't stay that way for long. The month of June has a tendency to be choppy at best, with the 26th and the 29th posting gains less than 30% of the time. The 28th is slightly bullish but can often be overshadowed by end of the quarter position squaring. We wouldn't mind seeing the market meltdown a little going into the end of the month because it would likely create buying opportunities.
The way we see it is 1310ish in the September must hold to avoid another washout that brings the market back to the mid to low 1260′s. In the meantime, a dip to the 1306 area could be a good place to nibble on the long side but with limited risk. Below there will be support in the mid to high 1290′s and then again 30 handles lower. If the bulls succeed, the upside objective will be 1363ish.
If you are day trading, look for support near 1317 and 1306; resistance lies near 1336 and 1343.
* 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 -
In other markets
6 – 22 Sell September crude 93/69 strangles for about $1,600 in premium (this was an adjustment from a previous strangle).
6 – 22 Sell August Yen 128.50 calls and 121.50 puts for about 75 ticks or $937.50 (this was an adjustment from a previous strangle to move into the next contract month).
(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)
Senior Analyst / Commodity Broker @ www.DeCarleyTrading.com
Local : 702-947-0701
*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.
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