Hot money is chasing stocks higher, Merry Christmas!

Free Futures Market Commentary for DeCarley Trading Brokerage Clients

Say what you want about the economy, the stock market looks good (for now)

There is plenty of dissension regarding the U.S. economy. Whether you are a bull or bear on the economy, it is important to understand that the direction of the stock market doesn't always follow the economy.  Those trading near the peak of the market in 2007/2008 will tell you that just as the economy looked the brightest is when it all came crashing down.  Similarly, the economy near the 2009 bottom was far from an upswing but that didn't stop the market from making is move higher.  Finally, not much has changed since Tuesday's lows, yet here we are screaming higher.

The point is, don't expect long-term bullish or bearish fundamentals to define the market in the short-term.If you are questioning the underlying fundamentals behind this move...don't.  Wait until we get into 2015, past seasonal support and momentum begins to taper.  

On a side note...

We live in one of the biggest boom or bust towns in the country  (sunny Las Vegas) and take it from us, things are bustling.  The strip is packed, and so are the local casinos.  We can't help but be optimistic for the time-being.  We won't be willing to turn short-term bearish until we see what prices do near 2100 in the S&P.

 Buy March T-Bond Puts

The 30-year bond looks to have turned the corner. Let's buy March 138 puts.

Bonds have rallied sharply from the November lows but seem to have turned the corner. With equities on the run, the Fed's intent to raise interest rates, and unattractive yields, we can't help but feel a full retracement of the recent rally is in the cards.  Friday's bounce could have been a great opportunity for the bears to establish positions.

Rather than selling calls facing unlimited risk, we prefer the idea of buying limited risk puts. Specifically, we recommend buying the March 139 puts for about 20 ticks or $312. The worst case scenario would be a complete loss of the $312 (approximately) plus transaction costs. But, if prices manage to slide from here, we are hoping this option picks up value quickly.

These options have about 64 days to expiration, so the time value erosion should be minimal assuming the bond market doesn't rally.

Treasury Market Ideas

**Consensus:** The ZB has put in a key-reversal and is likely headed lower. We are seeking a price of 139ish.

**Support:** ZB : 143'08, 142'0, and 138'29 ZN: 126'09 and 125'09

**Resistance:** ZB : 146'14, and 147'12 ZN: 127'27, 128'15, and 129'27

Position Trading Recommendations

*There is unlimited risk in option selling


 Santa Clause Rally in the ES (e-mini S&P 500)

We are seeking 2100 on this run.

Perhaps the market has come too far too fast in the eyes of some but we don't recommend fighting the tide.  Next week is statistically bullish.  Specifically, stats suggest that Monday, Tuesday and Friday (remember Thursday the market is closed) settles higher approximately 70% of the time.  In addition, we'll likely see low trading volumes, which tends to promote a "melt up" environment. 

We expect to see 2100 in the ES at some point next week, or in the early part of the following week.  Depending on how things look, we'll consider turning bearish (short-term) from there.

Stock Index Futures Market Ideas

**Consensus:** 2100 here we come!

**Support:** 2039, 2005, and 1970

**Resistance:** 2077 and 2098

Position Trading Ideas


Day Trading Ideas

**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**

Sell Levels: Let's see what Monday brings.

Buy Levels: Let's see what Monday brings.

In other markets....

September 10 - Sell December crude oil 82/98 strangles for about $1.10 ($1,100).

September 15 - Buy March 2015 sugar 18.00 calls near 32 ticks.

September 29 - Buy back the December crude oil 82 puts to lock in a profit of $370 to $400 per contract, and replace them with short 86 puts.  This brings in more premium and rebalances the trade.

October 2 - We made a big mistake rolling our 82 puts higher.  Let's rebalance the trade and look for volatility to decline by offsetting the existing strangle and selling the December 95/82.50 strangle.

October 9 - Buy back 95 crude oil calls to lock in gain on that side of the trade.

October 10 - Sell December crude oil 92 calls for about 60 cents to hedge the 82.50 puts. 

October 15 - Roll the December crude strangles into a January 70/90 strangle AND a December 74/88 strangle.

October 22 - Buy back December crude strangles to lock in profit of about $1,000 (this goes toward the premium lost on the 82.50 put).

November 10 - Sell January crude oil 87 calls for about 40 to 45 cents.

November 17 - Buy back the January crude oil 87 calls to lock in a profit of about $230 to $260 per contract before transaction costs.

December 1 - Roll the January crude oil 70 puts into two February 61/75 strangles.

December 9 - Buyback the crude oil $75 calls to lock in a profit on that side of the trade.  We'll hold the short $61 puts in hopes of a rebound in oil.

December 10 - Buy back the crude oil 61 puts and sell 58/66 strangles for February. 

December 12 - Buy back the February crude oil 66/58 strangles and sell the 64/53 strangles.

December 19 - Buy the March bond 138 put for 20 (or the 139 put for 25. 

December 19 - Get long the Aussie Dollar in a small way using e-micro futures.  We were buying near .8120 to .8080.

(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)

(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)

DeCarley Trading
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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.

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

**There is substantial risk of loss in trading futures and options.**

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