Stocks whip around, but finish the session close to where they began. The mixed session wasn't for a lack of news on Wednesday. The day was packed with economic reports, credit market news, commodity headlines, and even some Fed testimony on Capitol Hill. But in the end, stocks were split with 1,349 of them on the New York Stock Exchange moving higher and 1,760 lower. This made it close to a wash on the session.

In his testimony before Congress today, Fed Chairman Bernanke came down on the side of a troubled economy versus the risk of rising inflation. The chief policymaker assured lawmakers that he would "act in a timely manner as needed to support growth and provide adequate insurance against downside risks" in the economy.

While his signals of additional rate cuts are always music to traders' ears, the Chairman did have some pessimism for the U.S. economy. He predicts "sluggish economic activity in the near term," which shouldn't be surprising to anyone. Then he went on to discuss rising energy costs and pressures on businesses and consumers. Bernanke mentioned that if energy prices continue rising, it would create a "very tough situation," which tied in with our thoughts on Stagflation last week. Hopefully things will turn around before we get to that point.

There was also a positive reaction Wednesday when the Office of Federal Housing Enterprise Oversight said it will remove the portfolio growth caps for Fannie Mae and Freddie Mac on March 1. This move by regulators was an attempt to help alleviate some of the pressure in the credit markets. This will allow lenders Fannie Mae and Freddie Mac to commit billions in additional capital to mortgage securities.

Before trading started this morning, the Commerce Department reported that orders for durable goods dropped hard in January. It showed that orders to U.S. factories for big-ticket manufactured goods declined by the largest amount in the last five months. The 5.3% drop in January just reaffirms that manufacturers are also feeling the pain from a slowing economy.

The Commerce Department also released troubling data for the housing market. The data showed that New Home Sales fell for the third straight month in January. The 2.8% decline meant that the pace of new home sales fell to the lowest level since 1995. Also in the report, the median price of a new home dropped 4.3% to $216,000. This number was the lowest price since September of 2004.

Perhaps our biggest concern in the housing market is the balancing act of inventories versus sales. In January, the inventory of unsold homes actually fell. But a slowdown of home sales counteracted this relief of inventories. As a matter of fact, the number of months it would take to sell the current inventory increased to 9.9 months. This reached historic proportions. The last time it took this long to go through that much inventory was over 26 years ago. Until this trend reverses, we expect that our current housing problems will persist.

The rising energy prices were alleviated slightly when the government's weekly inventory report showed rising stockpiles. This brought the price of crude down $1.13 to $99.75 a barrel at the close. Oil might have fallen more if it wasn't for the continued weakness in the Dollar. The embattled greenback fell to an all-time low against the Euro in today's session.

The graphs below show the significance of today's economic news on a historic perspective.

The Dow Jones Industrial Average finished the day barely in the green. It moved up 9 points and closed 12,694. However, it struggled to break through its 50-day moving average (red line). It also closed just below a strong resistance level at 12,800. It will take strong upside momentum for the index to break through these areas of resistance.

The S&P 500 finished the session down 1-point at 1,380. It also remains just below its 50-day moving average (red line) and strong resistance barrier at 1,400. Similar to the Dow, it will take some significant news for the S&P to make it through these levels.

The Nasdaq Composite remains weaker than the other two indexes on the chart. It was able to move up 8 points in today's trading and finish at 2,353. It has spent the last month consolidating between 2,400 and 2,250. We'll be watching to see if it can break out of this range.

This week's trading has been perfect for our spreads. With all Bull Put Spreads, the gains in the indexes have helped us increase our cushions. We have a long way to go in this cycle, but with three and half weeks left until expiration, our positions are holding up well. Let's take a look at them all in more detail............

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/08)

$83.00 per contract profit potential

After opening significantly lower on Wednesday, Potash was able to fight its way back to a minimal loss on the day. At the closing bell, it was down $1.93 at $159.60. The stock was certainly over-extended on the chart and it didn't surprise us to see some profit taking. Even with a slight pullback, we are sitting in good shape in this spread. With grain prices staying at record levels, we don't see any reduction in demand for its products anytime soon. We also have a stock with plenty of strong bullish momentum and close to a 35-point cushion in our spread.

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/08)

$96.00 per contract profit potential

We rode out a little pain in this spread on Tuesday, but appear to be getting rewarded for our patience today. Today, the company reiterated its 10 million iPhone sales forecast at the Goldman Sachs Technology Investment Symposium. This ignited Apple's stock and it soared $3.81 in today's session, but continued to climb much higher after hours.

Normally this event would not be any big deal. But as we've mentioned over the last few weeks, analysts have been bombarding the company with negative stories about how its sales are not going to live up to expectations. This re-affirming today was just what investors wanted to hear and they hit the buy button. With the company squashing the rumors of underperformance, we expect the stock to continue rallying. There is also talk on the Street about the company holding a media event on March 6th that it's calling iPhone Software Roadmap. With this extra buzz in the stock, we should wake up tomorrow with plenty of extra breathing room in this spread.

MNX 165-160 MARCH BULL PUT SPREAD (15 contracts entered on 02/19/08)

$65.00 per contract profit potential

So far this week, it has been three trading days and moves up in MNX. It moved up another $0.86 today and closed at 179.99. Similar to the major indices, MNX has found itself in a consolidation pattern on the chart over the last month. With three and a half weeks left in this spread, we wouldn't mind seeing it continue to drifting sideways. MNX is currently sitting 14.99 above our "short" strike price.

RUT 620-610 MARCH BULL PUT SPREAD (10 contracts entered on 02/21/08)

$55.00 per contract profit potential

The Russell 2000 Index wasn't able to make it back to break even today. It closed slightly lower at 716.44. It has struggled the last two sessions with a resistance level at its 50-day moving average (red line). On both days, the index has encountered a lot of selling once it reached this barrier. If it could hold above this level, we could see a drastic move up. If not, it's likely to drop back to support near last Friday's low. We currently are sitting fine in this position with close to 100 points of space between the index and our put spread.

PCU 95-90 MARCH BULL PUT SPREAD (15 contracts entered on 02/22/08)

$50.00 per contract profit potential

We were able to get some more members filled in this spread earlier this week, but held off on attempting to get the rest of them filled today because of its price action. We will continue to monitor this stock for any opportunities to get everyone else filled. The problem is that the stock has taken off like we expected. It moved up $2.51 on Wednesday and closed at $115.95. This leaves us sitting comfortably with a $20.95 cushion in this spread.

PCLN 110-105 MARCH BULL PUT SPREAD (15 contracts entered on 02/25/08)

$70.00 per contract profit potential

After a strong move-up yesterday, Priceline fell $3.28 on Wednesday and closed at $123.25. It fell beneath Tuesday's low today, but was able to bounce and finish higher. PCLN has been range-bound the last several sessions, which is fine with us. Despite today's drop, the stock remains $13.25 above our position. We also have a couple of strong support levels working to our advantage if the stock encounters any a major selling.

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

We had a mixed day with fills on Monday. We were able to get filled in our Priceline spread and get additional members filled in PCU (but not everyone). Tomorrow morning, we are going to re-submit our PCU spread for those not filled or completely filled already.

Please note: The PCU spread will apply only to those members not filled or partially filled.

NEW TRADE ALERT (1)

Southern Copper Corp. (PCU)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 95 strike price

Buy 15 March Puts at 90 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

• 1. Check your spam folder for our emails.
• 2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

Talk of a bond insurer bailout helped the Dow reverse 200 points in the final hour of trading on Friday. After being plagued with selling all day, CNBC reported that Ambac Financial was going to be bailed out (which would help it retain its triple A rating) and the shorts started to cover. This sent the indices screaming higher in the final thirty minutes of trading.

In the past few months we've seen pressure mounting on the two largest bond insurers MBIA and Ambac. In past newsletters we've talked about the importance of these companies and mentioned that any collapse of either of them would cause widespread damage to the financial sector and massive selling in the indices.

According to the Associated Press, there is a consortium of banks (Citigroup, UBS, Wachovia, and Royal Bank of Scotland) working with the New York State Insurance Department on a possible solution to Ambac's problems. Friday's news helped reassure investors that further damage in the credit market might be averted for now. We'll see how this plays out and if there is truly a bailout in the works.

It's pretty amazing that two out of the three major indices were able to move up on the week after the reports of more weakness in the economy and inflation pressures. Last week we talked about Stagflation and how the rising price of commodities might put the Fed into a tough position at its March FOMC meeting. It'll try to be balancing the need to spur the economy by cutting interest rates while trying to fight rising inflation. Not an easy thing to balance.

With the CPI report showing inflation creeping up, it was a horrible time for oil to spike above $100 a barrel last week. It was good news for consumers when oil fell hard on Thursday, but the price stabilized on Friday with a $0.58 gain. Oil finished the week at $98.81 a barrel.

These things have certainly caused a negative mood on the Street and have caused traders to take negative positions on the Market in the last few months. In the first part of February, "short interest" jumped to a record at the New York Stock Exchange. The number of short-selling positions not yet closed out on the NYSE jumped 4.8% from the second half of January. Sometimes when a majority of Market participants start heading in the same direction, it's a good time to bet on an opposite move. If we get any good news, we could see significant "short covering" when these traders will have to buy back shares to cover their position. This could cause a huge move to the upside.

The Dow Jones Industrial Average recovered nicely in the last hour of trading on Friday and moved up nearly triple digits. The index gained 96 points and finished the week at 12,381. Friday's positive move gave the index a 0.3% advance for the week. Despite this, the index is still down 6.7% on the year.

The S&P 500 was also able to move up on the week after Friday's 10-point gain. The closing price of 1,353 put the index up 0.2% for the week. On the chart, the support level at 1,340 has held up pretty well over the last two weeks.

The Nasdaq Composite also struggled for most of the session on Friday but was able to squeak out a 3-point advance. Despite this gain, the index closed down 0.8% for the week and remains down 13.2% on the year.

Heading into this week, traders will turn their attention to more economic data. One key report will be on wholesale-level inflation. After a disappointing report on consumer inflation last week, a significant rise at the wholesale level could make it difficult for another Fed rate-cut. We will also hear about personal spending later in the week. We might need to buckle our seatbelts for some more turbulence this week.

Even with some down days last week, it was difficult to get filled in our new spreads. We were able to get filled in MNX and RUT, but only got a percentage of our auto traders filled in PCU. We will try to use patience and attempt to get the rest of the members filled in the PCU spread this week. For this, we are going to lower the credit on the spread to $0.45 and send it back to the brokers on Monday morning.

Meanwhile, we are going to enter a new spread on Priceline.com Inc. (PCLN). The company recently posted solid fourth quarter earnings that topped the consensus estimate by $0.12 per share. PCLN also forecasted good numbers for first quarter earnings that were in-line with analysts' expectations. Management expects earnings will range $0.50 to $0.60 per share. The company's full-year outlook is expected to range from $4.80 to $5.10 per share. In its recent earnings report, Priceline showed strong international growth. International gross bookings increased 113.0% year-over-year.  Meanwhile domestic gross bookings increased 24.2% over the previous quarter.

We've been very impressed with the fundamentals in PCLN and its growth. We also were encouraged when its recent run-up in the stock price has encountered very little profit-taking. We feel very comfortable moving forward with a March Bull Put spread in this stock.

Please note: The new spread will apply to all members. The PCU spread will apply only to those members not filled or partially filled last week.

NEW TRADE ALERT (2)

Southern Copper Corp. (PCU)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 95 strike price

Buy 15 March Puts at 90 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

Priceline.com Inc. (PCLN).

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 110 strike price

Buy 15 March Puts at 105 strike price

Total Credit 0.70 per contract

Potential Profit $1,050.00

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/08)

$83.00 per contract profit potential

Potash continued to hover around record-high levels last week. On Friday, it edged up another $0.13 and finished the week at $157. This gives us plenty of room for comfort in our put spread. On the chart, last week's low added another support level. This happened when it was able to break through an old resistance level (from last December and January) and then bounce off it like POT did last week.  

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/08)

$96.00 per contract profit potential

It was another painful week for Apple as it sank to lows that it hasn't seen since last June. According to Barron's, this was caused by several analysts' rising concerns over demand for the iPhone and iPod. We mentioned last week that analysts love to beat-up on the stock this time of year so that they can step in and pick up shares at bargain prices. We are confident that this is what is taking place right now and that we'll see a significant bounce in Apple within the next few weeks. Fundamentally, the stock has become really...really...cheap at these levels.

On Friday, Apple fell $2.08 and closed at $119.46. The good news is that it finished the session well off its lows. It bounced nicely off a support level and was moving higher into the close. We'll continue to monitor our put spread closely; but with a strong fundamental belief in this stock, we're planning on riding out any near-term turbulence in this spread. Let's sit tight and give this stock time to head back in the right direction.

MNX 165-160 MARCH BULL PUT SPREAD (15 contracts entered on 02/19/08)

$65.00 per contract profit potential

Similar to the Nasdaq, the MNX struggled for most of the session on Friday. But it was able to turn green heading into the close and edge up $0.71 on the day and finish the week at $177.34. There's no doubt that the index has been in a downtrend on the daily chart, but we believe that it is likely to bounce or move sideways over the next few weeks. By going with a put spread, it has allowed us to pick up a nice premium at safe strike prices. With four weeks remaining in the March cycle, MNX is sitting 12 points above our put spread.

RUT 620-610 MARCH BULL PUT SPREAD (10 contracts entered on 02/21/08)

$55.00 per contract profit potential

The Russell 2000 Index was a rare red symbol on Friday. Although it couldn't quite make it positive by the closing bell, it did come close. It dropped by only $0.85 on the day and settled at 695.43. Similar to the rest of the indices, it finished well off its lows of the session, which is a good sign heading into the weekend. On the chart, we believe that this index appears to be in the best shape. After falling hard in January, the RUT has recovered and has been consolidating. If it continues drifting sideways, don't be surprised to see us make this position into an iron condor.

PCU 95-90 MARCH BULL PUT SPREAD (15 contracts entered on 02/22/08)

$50.00 per contract profit potential

When PCU fell hard Friday morning, we were certain that we would get everyone filled in this spread. However, we were only able to get a percentage of the auto traders into this spread. We will continue to submit this put spread to the brokers with the hope of getting everyone into full positions in this spread. However, when looking at the daily chart on PCU, it's going to be difficult. Friday's low was an old resistance level and with the bounce off it, now it becomes support. Then when you throw in the momentum behind this sector, PCU becomes even more bullish. For those members filled in this spread, we appear to be sitting in good shape.

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

We were able to get filled in our RUT spread on Thursday, but not the PCU spread. Due to this, we are once again going to place the PCU spread as a day order and send it back to the auto trade brokers.

Please note: The new spread will apply to all members. This is a Day Order.

NEW TRADE ALERT

Southern Copper Corp. (PCU)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 95 strike price

Buy 15 March Puts at 90 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

In last night's New Trade Alert for PCU, we incorrectly listed the wrong strike prices. Please find the correct strike prices listed below.

Please note: The new spread will apply to all members. These are Day Orders.

NEW TRADE ALERT

Southern Copper Corp. (PCU)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 95 strike price

Buy 15 March Puts at 90 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

Stocks rebound after Fed minutes show policymakers' concern over the weakening economy. After a sluggish start to the trading day, stocks rallied after the FOMC (Federal Open Market Committee) minutes were released Wednesday afternoon.

The minutes of its January 29-30th meeting clearly mentioned that downside risks to the economy remain the focus. It stated that "With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action." The Fed reduced the Federal Funds rate by a half-point at that meeting. Eight days earlier, the committee made an unexpected three-quarter point cut.

When digging through the information released, we find the most important part to be the committee's upward revision in the core inflation range. The policymakers are now expecting core inflation in 2008 to range between 2.0% and 2.2%. This is higher than the previously anticipated range of 1.7% to 1.9% that it had laid out in October. We believe that this had a lot to do with today's rally because it left the door open for more rate cuts even though inflation is rising.

At the same time, the Fed lowered its outlook for gross domestic product this year to 1.3% to 2.0%. This was a reduction from its forecast last October of 1.8% to 2.5%.

Pre-Market trading was sharply lower after the CPI (Consumer Price Index) disappointed the Street. The Labor Department showed a rise of 0.4% in January, while the core CPI (excludes volatile food and energy prices) also ticked up 0.3%.

On a year-over-year basis, consumer prices edged up 4.3%, which was the largest increase since 2005. Meanwhile, the core CPI also advanced 2.5% over last year's numbers. Although this number is above the new higher range of 2.0% to 2.2%, we still believe that the Fed will be lowering rates again at its next meeting March 18th.

Also released Wednesday morning was the government report on housing starts. It didn't surprise us too much when it came in weak and signaled continued weakness in the housing market. New construction for homes and apartments rose 0.8% to a seasonally adjusted 1.012 million annual rate in January. This came one month after falling 14.8% in December to 1.004 million.

The slight gain in January came from robust apartment construction. Obviously, this takes the shine off the numbers while the future forecast remains weak for the industry with single-family starts and permits falling to 16-year lows. This foreshadows a sign of more pain ahead in the housing market.

Oil continued to cause trouble on the inflation front. One day after oil jumped $4.51 a barrel, the price of crude moved up again on Wednesday. It rose $0.73 cents to settle at a record $100.74.

Tech stocks were some of the strongest today thanks to a strong earnings announcement from Hewlett-Packard (HPQ). The company reported a 38% increase in net earnings and gave an upbeat forecast that was music to investors' ears.

The Dow Jones Industrial Average traded in a wide range today but finished in the green. By the closing bell, it gained 90 points and finished the session at 12,427.

The S&P 500 also had a wild ride this morning but was able to bounce off a support level at 1,340 and finish towards its high of the session. It rose 11 points on the day and closed at 1,360.

The Nasdaq Composite moved up 0.91% in today's trading. The index finished the session up 20 points at 2,327.

Tuesday's trading prevented us from getting filled on both of our new spreads. We were able to get into our MNX spread, but didn't get into the RUT position. We still believe that the RUT spread is a good opportunity and will be re-submitting this order on tomorrow's open. At the same time, we are entering another new spread on Thursday (see below).

We are attempting to get filled on a put spread in the Russell 2000 Index (RUT). The Russell 2000 serves as a benchmark for small cap stocks. The weighted average market capitalization for companies in the Russell 2000 is about $1 billion and the index itself is considered to be the benchmark for all small cap mutual funds. On the chart, this index has appeared to already have stabilized and has been drifting sideways for the last two weeks. We are also starting with a put spread in the RUT but could possibly add a call spread down the road.

Our second spread is going to be in Southern Copper Corp. (PCU). We are very bullish on copper and the company's pricing structure along with its recent growth. The strong fundamentals make this an excellent put spread. We also like the company's recent announcement of a $300 million stock buy-back program. These items should help propel this stock higher. On the chart, PCU has just broken through its 200-day moving average and should continue marching up the chart.

Please note: The new spreads will apply to all members. These are Day Orders.

NEW TRADE ALERT (2)

Russell 2000 Index (RUT)

OPENING MARCH BULL PUT SPREAD (10 contracts)

Sell 10 March Puts at 620 strike price

Buy 10 March Puts at 610 strike price

Total Credit 0.55 per contract

Potential Profit $550.00

Southern Copper Corp. (PCU)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 165 strike price

Buy 15 March Puts at 160 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/08)

$83.00 per contract profit potential

Potash made another record breaking week. It made a new all-time high on Tuesday and then again on Wednesday. It gained $3.50 today and finished the session at $156. This gives us a 31-point cushion in this spread. With agriculture business booming, we don't expect the fundamentals on this company to change anytime soon. Meanwhile, this week's low (old resistance on the chart) has formed a new support level on the chart.

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/08)

$96.00 per contract profit potential

Apple was able to stop the bleeding today when it gained $1.64. It has continued to be hit with a lot of negative comments from analysts. There was an interesting story from SeekingAlpha.com today that talked about how this seems to happen every January to Apple. It also said that "If you had despaired and listened to the all the disparaging analysis, you would have missed a big move up."

As you know, there's no love lost between us and analysts. However, because they tend to move the price of stocks, we have to pay attention to them and their comments. With that said, we still are very bullish on the fundamentals behind Apple and believe that it will start moving its way back up the chart in the near future. With the stock sitting at $123.82, we are left with nearly 9 points of breathing room in this position.

MNX 165-160 MARCH BULL PUT SPREAD (15 contracts entered on 03/19/08)

$65.00 per contract profit potential

After finishing lower on Tuesday, the Mini-Nasdaq 100 Index bounced back today with a gain of 2.27. The 1.29% gain takes the index up to 178.75 and gives us a $13.75 cushion in this spread. We believe that a large number of tech-stocks are sitting at over-sold levels and this index is due for a good-sized bounce. At the same time, we have solid support levels above our strike prices in case the MNX encounters anymore weakness.

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

Expiration turned out to be relatively uneventful. The usually volatile options expiration ended up being a fairly boring session for us. After suffering through some volatile ones recently, we'd much rather have ones similar to last Friday.

Although we had to roll two positions out to March earlier in the cycle, we were able to coast through last week without any positions taking much heat. In the past, this was pretty much standard operating procedure for us. Hopefully we are headed back in that direction.

Stocks were able to finish the week pretty flat, but that's not where they started. The indices tumbled early on due to disappointing economic reports.

The New York Fed's Empire State manufacturing index hinted that a recession might be coming when it declined to -11.72 in February. The Street was expecting it to come in at 7. This was the lowest reading since 2003 and was significantly lower than the 9.03 reported in January. Any number below zero signals contraction. Analysts believe that this index gives an early indication of monthly economic conditions.

There was more disappointment in the University of Michigan Consumer Sentiment Index. It fell 8.8 points to 69.6, which was the lowest number in 15 years.

Besides the economic data, there was more disturbing news in the financial sector. This time is was UBS that was hit with write-down talk. This talk started when Citigroup analysts speculated that UBS might need to write-off another $10.9 billion in 2008. The ironic thing is that also on Friday, The Wall Street Journal reported that Citigroup has prevented investors in one of its hedge funds from withdrawing their money because of significant losses.

The Dow Jones Industrial Average was able to fight its way back in the afternoon on Friday, but still finished in the red. The index dropped 28.77 on the session and finished at 12,348. However, it was able to move up 1.4% for the week.

The S&P 500 traded in a similar pattern on Friday but was able to gain 1.13 on the day and close at 1,349. It was able to move up 1.4% on the week, but remains down 8.1% for the year.

The Nasdaq Composite was the weakest index on Friday when it lost .46% and closed at 2,321. It also had the smallest gain on the week with a 0.7% advance. For the year, the index is down 12.5%.

February's expiration meant that most of our spreads expired worthless on Friday. Although it wasn't a very good payday for us, it did help us free up a significant amount of maintenance in our accounts. This should help us get back in the profit column in March. Let's take a look at the spreads that expired on Friday.

CLOSED FEBRUARY SPREADS

AAPL 155-160 FEBRUARY BEAR CALL SPREAD (10 contracts flipped on 01/23/08)

AMZN 95-100 FEBRUARY BEAR CALL SPREAD (20 contracts entered on 01/09/08)

MA 230-240 FEBRUARY BEAR CALL SPREAD (20 contracts)

AAPL 140-135 FEBRUARY BULL PUT SPREAD (10 closed on 02/05/08)

POT 145-150 FEBRUARY BEAR CALL SPREAD (20 closed on 02/05/08)

Due to a couple of adjustments, we already have two spreads opened up in March. Both of these positions are currently sitting in good shape. Normally we would have already released additional spreads for March, but this is a five week options cycle. This gives us plenty of time to release new spreads. With that said, we are going to be entering a couple new spreads on tomorrow's open.

We are going to start off with index spreads to help weed out some of the stock-specific volatility. This helps to spread the risk out among a basket of stocks. For the index to move in one direction or the other, it's going to take a lot of stocks to trend that direction.

The first spread is going to be on the Mini-Nasdaq 100 Index (MNX). This index has been trending lower like the major indices, but has since made a higher swing low on the chart. This gives us the thought it might be possibly stabilizing at these levels. At the same time, we believe that tech stocks have been dramatically oversold and are becoming quite cheap on a fundamental basis. Due to these items, we are starting with a put spread on MNX and leaving the door open to making this into an iron condor in the future.

The second new position is going to be on the Russell 2000 Index (RUT). The Russell 2000 serves as a benchmark for small cap stocks. The weighted average market capitalization for companies in the Russell 2000 is about $1 billion and the index itself is considered to be the benchmark for all small cap mutual funds. On the chart, this index has appeared to already have stabilized and has been drifting sideways for the last two weeks. We are also starting with a put spread in the RUT but could possibly add a call spread down the road.

Please note: The new spreads will apply to all members. These are Day Orders.

NEW TRADE ALERT (2)

Mini-Nasdaq 100 Index (MNX)

OPENING MARCH BULL PUT SPREAD (15 contracts)

Sell 15 March Puts at 165 strike price

Buy 15 March Puts at 160 strike price

Total Credit 0.65 per contract

Potential Profit $975.00

Russell 2000 Index (RUT)

OPENING MARCH BULL PUT SPREAD (10 contracts)

Sell 10 March Puts at 620 strike price

Buy 10 March Puts at 610 strike price

Total Credit 0.95 per contract

Potential Profit $950.00

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/07)

$83.00 per contract profit potential

Potash had a weak session on Friday but was able to bounce off a support level at $145 and finish fractionally lower. The loss of $0.61 put the stock at $147.88 at the end of the week. With just under five weeks left in this cycle, we have a long way to go in this position. But heading into Tuesday, we have over a 20-point cushion in this spread and plenty of good support levels above our strike prices.

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/07)

$96.00 per contract profit potential

Apple struggled on Friday and finished near its low of the session. It shed $2.83 on Friday and closed at $124.63. Despite the move lower at the end of the week, we still feel very good about this position. We are extremely bullish on Apple's fundamentals and believe that once the Market stabilizes, this stock will take off like a rocket. With plenty of time remaining in this spread, we're going to sit back and give this stock time to shake out the weak hands. We currently have almost 10 points of breathing room in this position.

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

Due to the Monday holiday, our normal Sunday evening Newsletter will be sent out tomorrow.

As always, Trade Happy and Trade Smart

Strong consumer spending sparked a huge rally on the Street. Stocks got an early jumpstart Wednesday morning thanks to a better than expected rise in January retail sales.

The Commerce Department announced a surprising 0.3% increase in consumer spending, which was much better than a decline of 0.3% to 0.4% that economists were expecting. Last month's consumer was much stronger than the -0.4% that retailers experienced in December, which was the worst holiday shopping season in the last five years.

The consumer spending was led higher due to increases in new cars. While this is good news, there were areas of concern inside the numbers. The increased spending on food and fuel were startling because they have the potential of bringing inflation back into the fold. At the same time, these added costs prevent the consumer from spending dollars in facets of the economy.

Also on the day, there was some disappointment from a rise in business inventories. This level grew more than expected and was likely due to the slowing economy.

The price of oil moved up another $0.46 today and closed at $93.24 a barrel. The price was pushed higher after Venezuela halted supplies to Exxon Mobil after the company was successful in court. Exxon Mobil was able to get a court to freeze $12 billion of Venezuela's assets. Also on the day, the IEA (International Energy Agency) lowered its 2008 forecast for global oil demand. Its rational behind the drop is due to a slowing world economy caused by the U.S. Meanwhile, the IEA's weekly inventory report showed rising reserves for oil and gasoline.

The Wall Street Journal reported this afternoon that News Corp. is making an attempt to help Yahoo fend off Microsoft. According to the WSJ, News Corp. would make a cash-infusion and get a stake in Yahoo that would be more than 20%. This deal would allow Yahoo to stay independent, while allowing News Corp. access to and/or control over Internet properties and advertising.

The Dow Jones Industrial Average started the day strong and finished it strong. It gained 178 points on Wednesday and closed at 12,552. This was the third straight gain for the index. On the chart, the next area of resistance sits at 12,800 and is also in the same area of its 50-day moving average (red line).

The S&P 500 has also put together a string of green days. It moved up 18 points in today's session and finished at 1,367. The next barrier for the index is just above the last swing high near 1,400.

The Nasdaq Composite has also found some upside momentum. It climbed 53 points today and closed at 2,373. The tech-heavy index is also sitting mid-way between support and resistance levels. If the positive news continues, the Nasdaq's next barrier will be above its previous swing high near 2,400. On the other hand, the nearest support level is close to 2,250.

The rally that we've seen this week has been good news for our spreads. We've had significant cushions in our call spreads, which should all expire worthless on Friday with plenty of room to spare. Meanwhile, the gains have been beneficial for our March put spreads, which have been able to increase their breathing room this week. There's a long ways to go in these two spreads, but so far so good.

Normally we would have a few new spreads released tonight for March. But with it being a five-week options cycle, we're going to hold off until Sunday. The good news is that it looks like we'll be able to get several spreads off our plate on Friday. This should help us get back to making money next month. Let's take a look at all our current spreads in more detail................

CURRENT FEBRUARY SPREADS

AAPL 155-160 FEBRUARY BEAR CALL SPREAD (10 contracts flipped on 01/23/08)

Current Loss on Rollover - waiting for broker confirmation

Tech stocks were on fire Wednesday and Apple was one of them. The stock gained $4.54 and finished the session at $129.40. With only two trading days left in the February cycle, our 25-point cushion should allow us to coast to the finish line in this spread.

On Wednesday, there was a report from Fortune magazine that as many as 1.5 million iPhones have been hacked. It quoted an Apple analyst that stated, "We believe the hacked iPhone market is much larger than expected. Our sources indicate that iPhone is being used in 35-40 countries vs. the 4 authorized countries. Out of the 4 million iPhones shipped, we estimate at least 1 million, and perhaps as high as 1.5 million may be hacked."

The analyst went on to knock the company on other products and question the ability of the company to weather a recession or weakness in consumer spending. Whenever we're in a spread, we always monitor the analysts and company news. However, keep in mind that analysts are a dime a dozen and usually have alternative motives. But they do move stocks.

AMZN 95-100 FEBRUARY BEAR CALL SPREAD (20 contracts entered on 01/09/08)

Current Loss on Rollover - waiting for broker confirmation

Amazon had solid gains on the session with a $3.28 move up, putting the stock at $77.73. The stock could do the same for the next two days and still not come anywhere close to our call spread. This spread should also expire worthless on Friday.

On Wednesday, Standard & Poor's Ratings Services said that it placed the credit rating it has for Amazon on CreditWatch with positive implications due to the company's fourth-quarter report and stock buy-back program. It also stated that "Completion of this authorization would result in a substantial de-leveraging of Amazon's balance sheet." This news should be excellent news for the stock price.

MA 230-240 FEBRUARY BEAR CALL SPREAD (20 contracts)

For members filled in this spread (no auto traders were filled)

MasterCard notched a slight gain today when it finished $0.76 in the green. This put the stock at $204.76, which is 25 points below our call spread with only two sessions left in the cycle. Baring any major stock-specific news, this one should also expire worthless on Friday.

Earlier today, MasterCard announced that it has expanded its cashless payment systems to 17,500 vending machines nationwide. It added more than 4,000 new locations that will now accept PayPass, which is considered contact-free payments.

CLOSED FEBRUARY SPREADS

AAPL 140-135 FEBRUARY BULL PUT SPREAD (10 closed on 02/05/08)

$370.00 per contract loss to close out spread

POT 145-150 FEBRUARY BEAR CALL SPREAD (20 closed on 02/05/08)

$255.00 per contract loss to close out spread

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/07)

$83.00 per contract profit potential

Potash was a rare red stock in our quote window today. It lost $1.59 on Wednesday and finished the day at $147.69. This came one day after the stock ran-up to a new all-time high. Despite today's drop, we feel very confident in this spread due to the fundamentals and its recent price action. After bouncing off its 50-day moving average (red line) last week, the stock has been marching back up the chart.

To add to our bullish view on the company's fundamentals, Barron's had a bullish story on POT today. It noted that Fertilizer producers should have another banner year as robust global industry fundamentals drive earnings-per-share momentum. Our plan is to just tag along for the ride.

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/07)

$96.00 per contract profit potential

Apple's rebound today was good news for our put spread. Last week's bounce off of $120 was important because it helped make this support level stronger. With five and a half weeks left in this cycle, we might need to rely on that support. However, we firmly believe that Apple is very attractive at its current price and expect it to find some bargain hunters to be sniffing around. For now, let's sit back and see where we go from here.

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.

February starts off eerily similar to the beginning of January. Sluggish economic reports, startling talk from Federal Reserve policymakers, and continued anxiety over bond insurers all took their toll on trading last week. The steady stream of bad news caused the indices to fall sharply and has economists on recession watch.

A majority of the public believes that we're already in a recession, according to a poll released by the Associated Press. It said that 61% of Americans believe that it's already here.

The economic slowdown was certainly evident on Friday when the Commerce Department said inventories of unsold wholesale goods rose by a surprising 1.1% in December. This is a troubling sign because rising inventories are a common sign of a recession.

On Friday, oil was able to bounce back with a $3.66 gain on the session. It moved up to $91.77 a barrel on the New York Mercantile Exchange. The jump was caused by OPEC officials talking about the possibility of reducing output along with anxiety in oil producing countries: Venezuela, Russia, and Nigeria.

The Nasdaq was able to fight the downtrend on Friday after Amazon announced a plan to buy-back up to $1 billion in stock and $1.25 billion in debt. The news from the online retailer helped to jump-start tech stocks, helping many of them finish the session in the green.

Tech stayed at the forefront this weekend over the Microsoft unsolicited bid for Yahoo. It appears that the Yahoo Board is set to reject the $31-per share offer for the internet search giant. Evidently, the board of directors believes that the $44.6 billion offer undervalues the company. Time will tell whether Microsoft either ups its offer or takes it direction to the Yahoo shareholders.

The Dow Jones Industrial Average started out February just like January......with a thud. The index gave up 561 points last week and is sitting at 12,182 going into the weekend. Last week's 0.53% decline was the biggest drop since 2003. On the year, the index is down 8.2%.

The S&P 500 also had a bad week with a 4.6% loss over the five sessions. On Friday, it shed 5.62 points and closed at 1,331. Similar to the Dow, it has several support levels below last week's closing price. On the upside, it has resistance just below 1,400.

The Nasdaq Composite was the bright spot on Friday. It managed to gain 11.82 points on Friday and finished the week at 2,304. For the week, the tech-heavy index lost 4.5%. On the chart, it bounced off of support on Thursday at 2,250. We'll have to wait until this week to see if this move has any strength.

This week, economic reports will be on the front burner once again. Traders will be watching closely when the Commerce Department releases data on January retail sales Wednesday. The Street will be dissecting the information looking for clues on how the consumer is holding up with falling housing prices, rising energy costs, and rising job cuts.

The Street will also be closely watching the credit market this week. According to the Wall Street Journal, in the past few days, low-rated corporate loans -- the kind that fueled the buyout boom of recent years -- have plummeted in value. As a result, banks are expected to try to unload some of those loans this week at fire-sale prices. The paper believes that this could trigger a new wave of global credit crunch beyond what we've already seen.

On a technical analysis basis, many traders expect the indices to test the January lows before reversing to the upside. This would help flush out the weak hands in the Market and is actually somewhat of a cleansing action that is healthy for stocks. But if anything remotely close to what the Wall Street Journal article mentions takes place, things could get real ugly, real fast.

Heading into the final five days of the February cycle, our spreads appear to be on their way to expiring worthless. It certainly has been a rough and tumble cycle, but the good news is that we should be able to wipe most of spreads off our plate and free up plenty of maintenance going forward. This should help us get back into the profit column going forward. With that said, let's take a look at all of our current positions............

CURRENT FEBRUARY SPREADS

AAPL 155-160 FEBRUARY BEAR CALL SPREAD (10 contracts flipped on 01/23/08)

Current Loss on Rollover - waiting for broker confirmation

After hitting support on the chart at $120 last Thursday, the stock gained $4.24 on Friday's rally in the Nasdaq and finished the week at $125.48. We still feel that the stock is extremely oversold on a fundamental basis, but this decline has been good for our call spread. With only five days remaining in this cycle, this position should expire worthless on Friday.

AMZN 95-100 FEBRUARY BEAR CALL SPREAD (20 contracts entered on 01/09/08)

Current Loss on Rollover - waiting for broker confirmation

Amazon's share buyback program was behind Friday's rally in tech stocks and was obviously good news for its stock as well. It gapped up on the open and finished the session up $2.59 at $73.50. Despite this bullish move in the stock price, our call spread appears to be in safe territory. The stock is trading over 20 points below our position and has several areas of resistance that should slow down any strong move to the upside.

MA 230-240 FEBRUARY BEAR CALL SPREAD (20 contracts)

For members filled in this spread (no auto traders were filled)

MasterCard made a strong move up on Friday after receiving an upgrade from an analyst. He lifted his rating to a "buy" on the stock with a $255 price target, noting that the company will be able to weather the economic slowdown by cutting costs. The analyst also said the company could be recession proof. This helped the stock gain $4.73 on Friday with a closing price of $205.61. This call spread also is sitting in good shape heading into the final week of the February cycle.

CLOSED FEBRUARY SPREADS

AAPL 140-135 FEBRUARY BULL PUT SPREAD (10 closed on 02/05/08)

$370.00 per contract loss to close out spread

POT 145-150 FEBRUARY BEAR CALL SPREAD (20 closed on 02/05/08)

$255.00 per contract loss to close out spread

CURRENT MARCH SPREADS

POT 125-120 MARCH BULL PUT SPREAD (20 contracts entered on 02/05/07)

$83.00 per contract profit potential

With this spread sitting in March, we now have plenty of time for the fundamentals to carry this stock higher. It has benefited by a strong grain market and we don't expect this to go away anytime soon. On the chart, POT has good support from its rising 50-day moving average (red line) along with solid support levels at $130 and $125.

On Friday, POT shed a mere $0.28 and finished the week at $137.50. We have a cushion of $12.50 and feel very comfortable with this spread.

AAPL 115-110 MARCH BULL PUT SPREAD (10 contracts entered on 02/05/07)

$96.00 per contract profit potential

Apple is another stock that has taken beating this year. We still are very bullish on the stock and feel that the fundamentals will cause bargain hunters to step in at its current level. Because of this, we are very confident sitting with this position for the March cycle. Last week's bounce off of $120 was a good sign for this spread. We will continue to monitor it closely, but feel good about this position.  

As always, Trade Happy and Trade Smart

ARE YOU NOT RECEIVNG NEWSLETTERS CONSISTENTLY?

We publish our weekly newsletters on Sunday and Wednesday evenings. They are then sent out via email and posted on our website. We also send out trade alerts and supplemental newsletters as needed. If you are not receiving these newsletters or trade alerts consistently, we suggest you take the following steps.

1. Check your spam folder for our emails.

2. Add info@incomespreadtrader.com to your email address book.

By adding our email address to your address book, this usually will allow our emails to get around your spam filter. If you take these steps and continue to not receive our emails, please contact our technical support department at info@incomespreadtrader.com.