Stock index futures are gaining steam in early trade, with March E-mini S&P 500 futures last up 20.00 at 709.50. The rally was ignited by hopes that positive manufacturing data out of China and talk of a new stimulus plan were signs the global power would help fuel a recovery in other nations.
Lind Plus Senior Market Strategist Richard Ilczyszyn said while it’s tempting to get excited about gains in stocks, you have to look at the bigger picture. “I am not saying the market will continue to freefall, but use common sense. We are in a downtrending market,” he said.
Until the market can hold significant support for several days and technical indicators start looking better, going with the trend and selling rallies is probably the better strategy for now, he said.
Lind Plus Senior Market Strategist Phil Streible said while he’s still waiting for confirmation to recommend bullish positions in stock indexes, signs of improvement in the stock market will likely boost commodities. Crude oil futures are currently trading above $44 a barrel.
He recommends a crude oil call spread with a long-term horizon: buy June 2010 $75 calls and sell 2010 $86 calls. These options expire May 17, 2010 and currently cost about $1,250, excluding commissions. That’s your defined risk on the trade. Phil said this strategy offers a good risk/reward ratio given the prospects for the economy turning around within the next year.
Phil Streible can be reached at 800-803-8037 or via email at pstreible@lind-waldock.com. Richard Ilczyszyn can be reached at 800-605-0095 or via email at rilczyszyn@lind-waldock.com.
Futures trading involves the substantial risk of loss and is not suitable for all investors.
