Stocks finish in positive territory despite another move up in oil. A promising durable goods report this morning along with a big drop in oil helped get the Market moving north. But the price of crude didn't stay down, rather, it reversed and recovered most of yesterday's losses. However, the indices were able to hold on to gains and finish the day in the green.

Today's positive close for stocks was an encouraging sign considering the gain in crude. Although we doubt that the indices will be able to continue advancing if oil keeps marching up the chart. We continue to believe that if we can just get a little help fighting inflation at the grocery store and pump, we'll be in good shape. This is why an end to fed rate cuts or even a rate hike doesn't scare us. Either of these things should also translate into a stronger dollar. The greenback actually showed some strength today against both the euro and the yen.

This morning's premarket economic data helped to get things started on the right foot. Although the durable goods orders were negative last month, it wasn't as dire as analysts had forecasted. Coming into the release, the Street was expecting between a 1.5% to 2.0% drop in April orders. Instead, the business and equipment spending fell by only 0.5% last month. Traders were very encouraged by the better-than-expected business spending, which should give a boost to the overall economy.

After the solid economic data, the positive sentiment started to get even more bullish when oil started falling. At one point, crude was down nearly $3 a barrel. But then word of more problems in Nigeria spooked commodity traders. This time a rebel attack over the weekend is now reportedly taking an additional 130,000 barrels out of the country's daily production.

Besides our weekly disruptions in Nigeria, an analyst's note at Morgan Stanley didn't help matters. In the statement, the analyst mentioned that limits on world oil supply could easily take crude to $150 a barrel. Tomorrow, all eyes will be focused on the government's weekly oil inventory report. Due to the holiday-shortened week, the EIA report was pushed back a day.

Trading volume continued to remain light today. Although some might be related to anxiety over the high energy costs causing pressure on the Market, the low volume is likely due to the holiday-shortened week and traders extending their vacations.

Today's Economic Data

The Dow Jones Industrial Average was able to bounce back late in today's session and finish up 45 points. The 0.4-percent rally puts the blue-chip index at 12,594. If the Dow can extend its two-day winning streak, the next resistance on the chart will be when the index reaches its 50-day moving average (red line). The mark provided a little support on the way down and will likely turn into resistance on the way up.

The S&P 500 also gained 0.4-percent in today's session. Its 5-point gain was the second straight positive session after the index hit its 50-day moving average (red line) on the chart. This line acted just like it was supposed to and helped the index make a nice reversal. With the index sitting at 1,390, the next resistance line is just 10 points above it at 1,400.  

The Nasdaq Composite was able to fight off its intraday losses and finish the session up 5 points. The 0.2-percent advance puts the index at 2,486. The next big test for the Nasdaq will be when it reaches its 200-day moving average (black line) on the chart.

We were able to take advantage by the selling intraday and get everyone filled in the AAPL spread. However, we still weren't able to get the rest of the auto traders into the RUT spread even though the index was also down during the session. This spread has proven to be a difficult one to get filled in, but we aren't giving up hope. For tomorrow, we are once again going to submit an order for those traders not already filled in this spread. However, we are going to lower the credit by a nickel with hopes of getting everyone into the spread.

Please note: This trade is only for those members not filled already in this spread. This is a Day Orders. If we do not get filled, we'll make an adjustment in the future.

NEW TRADE ALERT (1)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

RUT DAILY CHART

CURRENT JUNE SPREADS

POT 175-170 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$50.00 per contract profit potential

After taking a beating on Tuesday, Potash bounced back nicely today. The stock jumped $7.38 in today's session, getting back all of yesterday's losses and then some. The 3.88-percent gain gives us back more breathing room in this spread with the stock now sitting at $197.78. With less than four weeks to go in this spread, we're sitting in good shape. However, we would like to see some volatility in this stock start to dissipate.

MNX 187.50-182.50 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$40.00 per contract profit potential

The MNX added to yesterday's solid gains by advancing another $0.47 today. After hovering at its 200-day moving average (black line) last Thursday and Friday, it was good to see the positive action this week. Today's close puts the index at a resistance level on the chart. If it can make it through this one, the next stop for the MNX will probably be $205. With the index sitting at $200.01, we feel that we're sitting fine in this spread.

AAPL 165-160 JUNE BULL PUT SPREAD (15 contracts entered on 05/28/08)

$50.00 per contract profit potential

Apple has been able to weather the recent downturn in the Market better than most stocks. This isn't surprising when we consider that the Nasdaq has fared better than the other two major indices over the last month. This is because technology stocks are usually not as dependant on energy costs as the industrial stocks. We feel that we were somewhat lucky to get the downturn in today's trading, which allowed us to get filled in this spread. Apple was able to make it back into the green by the closing bell. On the session, it moved up $0.58 and finished the day at $187.01. This gives us over a 20-point cushion in this spread with just three and a half weeks left in the cycle.

As always, Trade Happy and Trade Smart

We had mixed success in getting fills today. We were able to get half of the auto traders filled in the RUT spread, but AAPL moved up to fast for anyone to get in. We are going to send in the RUT spread to the auto trade brokers for those members not filled on Tuesday. On AAPL, we are going to also send this one in, but are going to adjust the strike prices and the credit. Even at the higher strikes, we feel that this is a very good spread.

Please note: These trades are only for those members not filled on Tuesday. These are both Day Orders. If we do not get filled, we'll make adjustments in the future.

NEW TRADE ALERT (2)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

Apple Inc. (AAPL)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 165 strike price

Buy 15 June Puts at 160 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

As always, Trade Happy and Trade Smart

The week ended in typical fashion........rising oil and falling stocks. Of course there was the usual lousy housing numbers weighing in on Friday that added to the pessimism.

Once again oil was the catalyst on Friday when it made a big run-up during the session. However, it gave back some of those gains and finished the day with a $1.38 gain. The 1.1-percent increase took crude up to $132.19 a barrel on the New York Mercantile Exchange. On the week, oil moved up nearly 5-percent over the last five trading days. Over the same period, gasoline gained over 5-percent, leaving the pressure on consumers at the pump.

The rising fuel costs took its toll on some of the transportation stocks. Airline stocks took another beating along with automakers. One ironic part of Friday's trading was that some of the major oil stocks failed to stay in the green even though oil continued to surge.

Friday's housing data from the National Association of Realtors showed that sales of existing homes declined in April. The drop was the second consecutive month of lower sales. The only positive aspect was that the number was not quite as bad as analysts were expecting. The reported also showed a drop of 8-percent in median home prices while the inventories of unsold homes continue to build. According to the data, the current backlog of homes on the market would take more than 11 months to wipe out the current inventory.

Although the housing data was certainly expected, it does help reinforce a cautionary flag in the minds of investors. With the numbers continuing to remain weak, if not weaker, the deteriorating housing market will continue to weigh heavily on the overall economy. With high energy and food costs already crippling the consumer, the last thing they need is to feel like their homes are losing value each month. Unfortunately, that pain is probably not going to go away very soon.

On a positive note, the light trading volume on such an ugly day is slightly encouraging. Quite often on a Friday before a three-day holiday we'll see low volume with many traders choosing to extend the holiday. Of course, this also adds to the volatility of days like Friday. Lower volume usually means bigger price swings.

Last week's rise in oil was not helped by the falling dollar. Meanwhile, investors looked for safety in Treasurys.

Heading into this week, the Street will be focused on a plethora of economic reports, including: consumer confidence, new home sales, gross domestic product and inflationary pressures. However, all of these things can be thrown out the window if the three letter word (oil) continues to climb.

"It's a pretty price sensitive week for economic data," Pervan said. "The data we're seeing out of the U.S. at the moment looks pretty weak. You'd expect that trend to continue, pushing further down on the dollar."

Friday's Economic Data

The Dow Jones Industrial Average was off almost 170 points at one point on Friday, but was able to pare some of those losses and finished the session down 145 points at 12,479. It was an ugly week for the blue-chip index. It fell almost 4-percent over the last five trading sessions. On the chart, the index fell below its 50-day moving average (red line) for the first time since moving above it in April. 

The S&P 500 lost 1.3-percent on Friday. The 18-point tumble took the index down to 1,375. It fell 3.5-percent on the week, but remains just above its 50-day moving average (red line) on the chart. Obviously, we'd like to see it remain above this support level all week.

The technology-laden Nasdaq Composite Index shed 0.8-percent on the final trading day of the week. It finished the session down 19 points at 2,444. For the week, the Nasdaq lost 3.3-percent. It remains the strongest of the three indices on the chart, but is starting to show some major cracks in its strength.

Last week's trading was certainly not ideal for our spreads. The losses trimmed some of the cushions in our spreads. Even though the indices were moving south, we had a very difficult time trying to get filled in our RUT spread. With all of the red across the board, we decided to stay firm with our limit orders. As many of you know, we usually try to be very stringent on the way into a new spread. It doesn't hurt to be greedy because those credits could have a big impact if we ever need to make an adjustment down the road.

As we mentioned in last Wednesday's newsletter, we are taking a very conservative approach until the indices decide to settle down. However, we still find the RUT spread very appealing. Last week's action in the index just reaffirmed our confidence in this spread. Due to this, we are once again putting in an order on tomorrow's open.

We are also moving forward with a bull put spread on Apple Inc. (AAPL). This stock is an old favorite that we used to play like clockwork every single month. We sat out last month due to its earnings announcement but feel that it is giving us a very good entry point on a new put spread.. The stock has bounced back nicely since its hard start to the year and is setting up for another run ahead of its launch of the new 3G iPhone next month. Although Apple pulled back slightly last week, it had a nice move higher on Friday. We are coming in with a put spread at very conservative strike prices with plenty of support on the chart in case there's any more weakness in the Market.

Please note: These are both Day Orders. If we do not get filled, we'll make adjustments in the future.

NEW TRADE ALERT (2)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

Apple Inc. (AAPL)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 160 strike price

Buy 15 June Puts at 155 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

RUT DAILY CHART

AAPL DAILY CHART

CURRENT JUNE SPREADS

POT 175-170 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$50.00 per contract profit potential

POT turned in another weak performance on Friday, but it could have been worse. The stock was dramatically lower earlier in the session, but was able to trim a lot of those losses. However, it still shed $3.41 on Friday's session. The 1.71-percent loss took the stock down to $196.33. On the chart, we have plenty of good support levels between the stock and our strike prices, which helps give us comfort in this spread. With four weeks to go in this cycle, we're sitting with over a 20-point cushion.

MNX 187.50-182.50 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$40.00 per contract profit potential

The MNX also encountered some pain on Friday, but was able to finish off its lows. By the time the closing bell rang, it was down $0.59 at $195.90. The good news was that it was able to hold above its 200-day moving average (black line). As long as the MNX is able to hold above this support level, we feel like we're sitting in excellent shape.

As always, Trade Happy and Trade Smart

That's why they call it Black Gold. Oil continued to scorch the charts while the Fed minutes helped confirm that rate cuts are now in the rear window. These two things were enough to send the bulls running for their lives.

The FOMC minutes released on Wednesday showed that the last rate cut was a close call. It also appeared to suggest that even if the economy weakens, officials appear very reluctant to cut rates again.

The committee also lowered its forecast for U.S. GDP (gross domestic product) to come in between 0.3%-2% for this year. It also slightly increased its estimate on inflation for next year. Although the end to rate cuts will certainly affect interest-sensitive sectors like construction, it will also help the falling dollar and inflation pressures. It was also encouraging when the minutes mentioned that deterioration in the financial markets had apparently receded.

Falling demand in the U.S. did little to boost crude supplies last week. Instead, the EIA (Energy Information Administration) reported a surprise drop in inventories by a whopping five million barrels. Analysts were expecting a slight increase in oil and gasoline supplies. Gasoline inventories also took the Street by surprise when it declined 755,000 barrels versus the expectations of a 400,000 increase.

Crude made another all-time closing high today when it jumped $4.19 and settled at $133.17 a barrel. However, prices continued to climb in after hours trading. We feel like a broken record when we keep asking ourselves how much higher can this possibly go. It's also very hard to stop ourselves from buying puts on it because when it rolls over, it's going to roll hard.

The increasing oil price flies in the face of lower U.S. demand so far this year according to the EIA data. But this has done little to counteract the increasing worldwide demand in China and India. China is expected to dramatically increase its diesel imports following the earthquake last week. It already has been stockpiling heavily for the Olympic Games in August. Of course this doesn't even include the refining and exploration issues in the U.S. that has prevented any increased domestic output.

The high energy prices continue to add pressure on the already weakened consumer. Prices at the pump moved up another seven cents last night to a U.S. average of $3.80 a gallon. According to the AAA, prices are already up more than $0.60 over last year's prices. With today's big jump, this price is certainly going to move north again.

Until we get some relief in crude, the money appears to be headed for the sidelines. At this point, it's kind of hard to blame anyone for taking a wait and see approach.

Gold has been the beneficiary over the last several sessions. It has climbed as investors have looked for safe havens. Gold closed higher for a fifth straight session. It finished up $8.50, at $9.38 per ounce.

Today's Economic Data

The Dow Jones Industrial Average sliced through our support levels like a hot knife going through butter. It tumbled 227 points in today's session and closed at its 50-day moving average (red line) on the chart. Obviously we'd like to see this support level hold. But with oil moving the Market, you can throw the technicals out the window.

The S&P 500 also got crushed in today's trading. It plummeted 22 points and finished the day at 1,390. Although it closed at a support level on the chart, we're not taking any bets as to whether it holds above it.

The Nasdaq Composite also took a beating in today's session. The index dropped 43 points and finished the day at 2,448.

The last two trading days have been pretty ugly sessions. With most of the indices finishing today's trading at their lows of the session, we'd expect to see some follow-through to the downside on tomorrow's open. But with oil driving the Market, it makes it very hard to forecast and even harder to trade. Due to this, we have taken a cautionary mindset in our trading strategy.

On Monday, we were able to get into two new spreads (POT & MNX). However, we weren't able to get filled in RUT on either Monday or Tuesday. We decided to hold off on making an attempt today. However, even with today's pullback in the RUT, the spread is still trading for around the same credit. We are still very confident in those strike prices and are going to go ahead with this spread for tomorrow. However, we're going to hold off on any other new spreads for the time being.

Please note: This is a Day Order. If we do not get filled, we'll make an adjustment in the future.

NEW TRADE ALERT (1)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

RUT DAILY CHART

CURRENT JUNE SPREADS

POT 175-170 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$50.00 per contract profit potential

After bouncing back nicely in yesterday's session, POT took a drubbing today. It shed $8.07 and finished the day at $195.60. Yesterday it was helped when an analyst anticipated another above-average demand for crop-protection chemicals. However, the fundamentals did little to help POT today. The nearly 4% loss puts the stock just over 20 points above our spread. While this is usually a very comfortable place to be, we'll be monitoring this one closely for any additional signs of weakness. On the chart, it's quite evident how conservative our strike prices are in this position.

MNX 187.50-182.50 JUNE BULL PUT SPREAD (15 contracts entered on 05/19/08)

$40.00 per contract profit potential

The MNX has encountered a rough patch so far this week. It has moved lower in the last three sessions and lost another $4.39 in today's trading. The 2.19-percent decline puts the stock back at its 200-day moving average (black line) on the chart. This has been a very good support level for the index over the last month. With the MNX finishing today's trading at $195.68, we are left with just over an 8-point cushion in this spread.

As always, Trade Happy and Trade Smart

We came close to getting everyone filled in all of our positions today, but the RUT didn't pullback quite enough for us. Due to this, we are going to send it back to the auto trade brokers tomorrow morning and leave it at the same limit order.

Please note: This trades is only for those members not filled on Monday. This is a Day Order. If we do not get filled, we'll make adjustments in the future.

NEW TRADE ALERT (1)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

As always, Trade Happy and Trade Smart

Stocks overcame another surge in oil prices on Friday and finished the session mixed. It was another remarkable day when stocks were able to pare most of the losses despite oil making another all time high, not to mention the pessimism in another extremely low reading on consumer confidence.

The big run in oil was fueled by another bullish report on crude by a Goldman Sachs analyst. The company raised its forecast on oil to an average of $141 a barrel for the second half of 2008. This was a dramatic increase over its earlier analysis of $107 a barrel over the same time frame. During trading on Friday, oil made another all time closing high with a $2.17 advance. The 1.8-percent gain took crude to $126.29 at the end of trading on Friday. Of course, the falling dollar did not help matters when it fell against the euro and the yen.

Increased food and energy costs continue to pressure consumers, in turn affecting the caution on Wall Street. With consumers forking over almost $3.79 on average for a gallon of gasoline, this cuts into their discretionary spending. The same thing can be said at the grocery store where shoppers are spending a lot more for the same groceries. The end result is continued pressure on the consumer, which means a struggling economy.

The concerns in the economy showed up in Friday's University of Michigan consumer confidence report. The index dropped from April's reading of 62.6 to a fresh low of 59.5 for May. This was the lowest recording since June 1980, showing the consumers pessimism in the economy.

GRAPHIC COMPLIMENTS OF BRIEFING.COM

Until relief shows up at the pump or grocery store, the Market will continue to be under pressure. However, the resilience of the indices in the face of this pressure tells us that the indexes are poised to move higher if there's a reprieve from the rising prices.

The positive news on Friday was in the Commerce Department's housing numbers. The government's data showed unexpected increases in both housing starts and building permits last month. This was very good news for the downtrodden housing market. The big uptick was helped by a 36-percent increase in multifamily construction.

Friday's Economic Data

The Dow Jones Industrial Average spent the last three days of the week testing old resistance at 13,000. Although it struggled most of the session on Friday, it was able to fight its way back and lost only 5 points on the day. The 0.05-percent loss put the index just below its 200-day moving average (black line) at 12,986. Any pullback in oil could help the index break through this difficult barrier. Last week, the Dow moved up 1.8-percent.

The S&P 500 also made a late-day comeback and finished the session in the green. It notched a 1-point gain and closed the week at 1,425. It also remains just shy of its 200-day moving average (black line) on the chart but gained 2.6-percent over the last five trading days.

The Nasdaq Composite is the one index that finished last week above its 200-day moving average (black line). However, it shed 4 points on Friday and finished the session at 2,528. On the week, the tech-laden index rose 3.4-percent.

This week's trading wrapped up another solid month for our spreads. We got back most of our WYNN loss from the month prior, and all of our spreads expired worthless just the way we like it. The only issue we had was getting filled in the Apple spread for our auto traders. If any members did get filled, it was easy money in that spread. Other than that fill attempt, it was a very easy month for our positions. We put them on and then built up significant cushions across the board. This allowed us to sit back and coast to the finish line without any stress. Now that we've hit Payday, let's add up our totals from last month.

MAY TOTALS

WYNN 80-75 MAY BULL PUT SPREAD $65.00 per contract profit

RUT 650-640 MAY BULL PUT SPREAD $50.00 per contract profit

MNX 175-170 MAY BULL PUT SPREAD $40.00 per contract profit

AZO 115-110 MAY BULL PUT SPREAD $50.00 per contract profit

TOTAL MAY PROFIT $3,075.00

While it's always nice to sit back and count our money, the weekend is about over and it's time to get things started for next month. For June, we have a five week option cycle. This means that we have plenty of time to enter new positions and good premiums for spreads that we enter this week. With that said, let's get things started for Monday morning.

On the open, we are going to start with another Russell 2000 Index (RUT) bull put spread. Obviously we've had a very good run in this index and believe that we have another high probability trade for next month. On the chart, the RUT has now formed several more support levels on its recent run-up. By placing our strike prices at conservative levels, we give up a little premium but also gain some safety. If we get filled tomorrow, we'll have a 90-point cushion to start with. We like those odds.

Our second spread is going back to one of our favorite fertilizers Potash Corp. of Saskatchewan, Inc. (POT). After the quick sell-off at the end of April (along with the whole sector), POT has recovered nicely. The pullback helped to add some good support levels on the chart, which should help us if the industry takes another breather. As you know we've been bullish on this stock for a long time and feel that the technicals have now given us another good entry in this stock. Because of the volatility in POT, we're able to bring a nice premium in this spread.

Our final spread for tomorrow is going to be on anther favorite of late, MINI-NASDAQ 100 INDEX (MNX). We've enjoyed the run-up in technology over the last several months and believe that these stocks will continue to lead the way. On the chart the MNX couldn't look much better. It broke through its 200-day moving average (black line) and then pulled back to it before taking off again. We're giving ourselves plenty of breathing room in this spread at the beginning, which should help us make it to the finish line with plenty to spare in this one.

Please note: These are Day Orders. If we do not get filled, we'll make adjustments in the future.

NEW TRADE ALERT (3)

Russell 2000 Index (RUT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 650 strike price

Buy 15 June Puts at 640 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

Potash Corp. of Saskatchewan, Inc. (POT)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 175 strike price

Buy 15 June Puts at 170 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

MINI-NASDAQ 100 INDEX (MNX)

OPENING JUNE BULL PUT SPREAD (15 contracts)

Sell 15 June Puts at 187.50 strike price

Buy 15 June Puts at 182.50 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

RUT DAILY CHART

POT DAILY CHART

MNX DAILY CHART

As always, Trade Happy and Trade Smart

Our newsletter system is undergoing a technical upgrade this weekend. Due to this, our Sunday evening newsletter will not be able to be sent out via email until Monday morning. We apologize for any inconveniences this might cause, however, members will be able to access the same newsletter by logging onto the website Sunday evening. It will be posted same time as it is every Sunday night. We are planning on releasing a few new spreads in the newsletter, so make sure you access the site for this information. You can also expect to receive the same newsletter by email Monday morning. We appreciate your patience in this matter and we feel that these upgrades will help improve our newsletter system.

As always, Trade Happy and Trade Smart

Falling oil prices and a tame inflation reading helped jumpstart the Market on Wednesday. This morning's report on inflation came in lower than expected, which ignited a pre-market surge. Then we got a long-awaited pullback in crude, which added to the bullish sentiment.

We've felt over the last two weeks that if we could just get a relief in oil, the indices would get a strong surge to the upside. This is exactly what we've gotten the last few sessions. Today's strong rally stalled late in the day after program selling kicked in when the indices hit recent highs (resistance on the charts). Until we break through these old levels, traders will continue to sell at these highs.

This morning's rally started when the Labor Department's consumer price index showed an easing in inflation, which wasn't expected. Although the index showed a tick up of 0.2-percent in April, this was lower than the 0.3-percent gain in March and was less than the Street was expecting. Despite this tame reading, the data showed that food prices spiked by the largest amount in over 18 years. The 0.9-percent jump in food prices was mitigated by the flat reading for energy prices last month (according to the government).

Meanwhile, the government's report on core inflation was also better than expected. This data strips out the volatile food and energy. It rose a mere 0.1-percent in April compared to expectations of a 0.2-percent gain. This number was also lower than the 0.2-percent rise a month earlier.

Today's inflation data was very good news on the Street and could be signaling that the economic slowdown might be letting up. While it's certainly too early to tell, the lower core CPI reading does raise the likelihood that the Fed might keep interest rates at the current level. After previous surges in inflation data, many were starting to think that the central bank will start raising rates in an attempt to fight inflation. If we can get inflation data to deflate, the low interest rates could help to fuel an economic recovery.

The year-to-year core inflation is just over the Fed's comfort zone. With today's report, the core CPI is at 2.3-percent annual growth. The Fed has mentioned in the past that it would prefer the number to be between 1.5 to 2.0-percent.

Equally important to the inflation data was the pullback in the price of crude. Although the Energy Information Administration reported a rise in crude inventories of only 200,000 barrels last week, it still did the trick of helping to bring down the price today. Over the past several weeks, we've seen inventories come in dramatically higher than analysts were expecting but the price of crude shot up anyway. Today was just the opposite when the numbers came in sharply lower than expected (analysts expected a gain of 1.8-million barrels), but the price dropped nonetheless. Of course, demand has also fallen off in the U.S., which should help eat into the price. On the session, oil closed down $1.58 at $124.22 a barrel.

There was also good news for the Market today in currency trading. The dollar moved up against the euro and the yen. A stronger dollar should help reign-in the price of crude.

Today's Economic Data

The Dow Jones Industrial Average had enormous strength today until it closed in on the 13,000 level. It came close to this number, but then the sell orders started to hit the floor during the last hour of trading. By the time the closing bell rang, the Dow was only up 66 points at 12,898. Besides the psychological barrier at 13,000, the indices' 200-day moving average (black line) is hovering just above this point. It's going to take very strong momentum for the index to break through both of these barriers.

The S&P 500 was also soaring high until it ran into resistance at 1,420. This old high from last week was enough to send the bulls scurrying for the rest of the session. At the end of trading, the index was up only 5 points at 1,408.

The Nasdaq Composite actually broke through its 200-day moving average (black line), but wasn't able to hold above it. It was hit the hardest late in the day and only escaped the session with a 1-point advance. The tech-laden index finished the day at 2,496.

This week's trading has pretty much secured our month in the profit column. It has helped add to our cushions and has taken away any doubt this month. Because next month is a five-week options cycle we don't need to enter any new spreads this week. Instead, we plan on letting our current positions expire worthless on Friday and then start rolling out a few new spreads in this weekend's newsletter. The good news is that we have plenty of time to stagger our new spreads next month. For now, let's take a look at all of our open spreads in detail...........

CURRENT MAY SPREADS

CLOSED MAY SPREADS

RUT 650-640 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$50.00 per contract profit potential

The RUT was screaming higher until the last hour and a half of trading. Then it took a sharp tumble and actually finished the day in the red. The RUT lost $0.78 on Wednesday and closed at $736.07. This leaves us with an 86-point cushion with just one full of trading left in this spread. This one has been pretty secure the whole cycle, just the way we like it.

MNX 175-170 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$40.00 per contract profit potential

The MNX also ran into a barrage of selling late in the day and closed down $0.33 at $199.73. After today's trading, the MNX is sitting nearly 25 points above our put spread. Similar to the RUT spread, this one has been stress-free this cycle and should expire worthless.

AZO 115-110 MAY BULL PUT SPREAD (15 contracts entered on 04/28/08)

$50.00 per contract profit potential

AutoZone has certainly moved around a lot this cycle, but never did cause us much concern. It has been working its way up the chart nicely along its 20-day moving average (light blue line). In today's trading, AZO ticked up $0.16 and settled at $126.83. This gives us almost 12 points of breathing room heading into the final two days of the cycle.

As always, Trade Happy and Trade Smart

Soaring oil prices proved too much for the Market to overcome last week. After multiple weeks of gains, the indices turned in negative performances last week when crude continued its stretch of record highs. With inflation already on investors' minds, rising energy prices just flamed the concerns last week.

Crude has moved up in the last six sessions, gaining nearly 12-percent. On Friday, it hit a new intraday record at $126.25 a barrel. However, this is nothing new. In five out of the last six sessions, oil has closed at record highs. It finished the week at another one with its 1.8-percent advance. Oil settled at $125.96 a barrel on the New York Mercantile Exchange, which puts it up over 30-percent on the year.

The ironic thing is that fuel demand in the U.S. has fallen due to the economic slowdown. We've also seen the country's stockpiles coming in much larger than expected each week in the EIA numbers. But worldwide demand and lack of production capacity has outweighed our situation. Not to mention our belief that the price has moved significantly higher than the supply and demand justifies. The question remains whether or not stocks can move higher with energy staying at these levels. After last week's moves in the indices, we'd have to say quite the contrary.

Of course, Friday's trading wasn't helped when AIG reported a $7.8 billion loss for its first quarter. The Dow giant also announced a plan to raise $12.5 billion in capital in order to protect its current credit rating. News out of Citigroup also hurt the sentiment on the session when its CEO announced its newest efforts to trim costs and reduce its liabilities.

With the government rebate checks now being delivered to U.S. taxpayers, analysts are looking to see if we get a bump in consumer spending. But with the escalating energy prices, consumers might not be able or willing to buy those goods and services. We should get a better feel for what's taking place with the retailers this week when some of the biggest ones report earnings this week. We also hear from the Commerce Department on Tuesday when it reports the April retail sales numbers. After declining 0.1-percent in March, economists are looking for a flat reading in April.

Besides the consumer spending, we will also learn about the inflation that shoppers are facing when the consumer price index report is released on Wednesday. The Street will be looking for a rise of 0.3-percent, which is the same increase as in March. While analysts expect the core consumer prices (excludes volatile food and energy) to also be the same as the month earlier at 0.2-percent.

Friday's Economic Data

On the session, the Dow Jones Industrial Average lost 120 points, finishing the week at 12,745. Friday's 0.9-percent loss left the index down 2.4-percent for the week. This puts the Dow a little deeper into the red on the year at a negative 3.9-percent for 2008. On the chart, the index fell below its 20-day moving average (light blue line) and closed just above a good support level. It also is at support from its rising channel line. If it breaks below these two levels, it's likely headed for 12,600. If it bounces, the Dow is probably headed back to test its 200-day moving average (black line).

The S&P 500 declined 0.7-percent on the session. The 9-point drop took the index down to 1,388 at the end of the week. So far this year, the S&P is down 5.5-percent. On the chart, it closed at its 20-day moving average (light blue line) and a support line from its upward trending channel. This would be a logical area for a bounce if the positive trend is going to continue.

The Nasdaq Composite was the strongest of the three on Friday. Although it finished the day in the red, it only declined 0.23-percent. The 5-point loss on the last day of the week puts the tech-heavy index down 7.8-percent for the year. It closed just below an old resistance/support line on the chart, but well above its 20-day moving average (light blue line).

Our spreads continued to handle the selling very well. Although the indices suffered a lot of pain last week, our positions barely lost their cushions, if at all. Our main concern remains the AutoZone spread, but even that one still has a decent amount of breathing room in it. The other two open spreads look like they should be money in the bank with only four sessions left in them (index spreads settle on Friday's open). For now, let's take a look at all of our open spreads in detail...........

CURRENT MAY SPREADS

CLOSED MAY SPREADS

RUT 650-640 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$50.00 per contract profit potential

The RUT wasn't held down on Friday. Instead, it finished the session with a green candle and a slight gain of $0.50. On the chart, it has found strength from support at $715. After bouncing off this line two straight sessions, we expect it to hold up this week. With the RUT settling at $720.05, we are left with a very good 70-point cushion in this spread.

MNX 175-170 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$40.00 per contract profit potential

The MNX also turned in a decent performance on Friday, but ended up a little in the red. It dropped $0.66 on the session and finished the week at $196.03. On the chart the MNX has found very good support at the $195 level. With its 200-day moving average hovering in the same neighborhood, this should continue to help keep the index above this level. Heading into the final week of trading, the MNX is sitting over 20 points above our position. We should be able to coast to the finish line in this one.

AZO 115-110 MAY BULL PUT SPREAD (15 contracts entered on 04/28/08)

$50.00 per contract profit potential

AutoZone also held up fairly well on Friday. Although it didn't finish the day positive, it only lost $0.32 and closed at $122.44. In the last three sessions, AZO has been riding along its 20-day moving average (light blue line) on the chart. With five days to go in the May cycle, we have just over a 7-point cushion in our spread. We also have several good support levels on the chart that should help us make it to Friday with our spread intact.

As always, Trade Happy and Trade Smart

Oil surges and stocks tumble. Regardless of another unexpected rise in inventories, the price of crude hit another all-time high on Wednesday. It nearly hit $124 in today's session before settling up $1.69 a barrel. The 1.4-percent gain on the day put crude at $123.53 a barrel on the New York Mercantile Exchange. The skyrocketing price of oil proved too much for investors to look past as stocks finished deep in the red across the board.

Today's move up in oil was quite remarkable considering the massive build in supplies last week. The EIA (Energy Information Administration) announced that inventories had increased by four times more than expected at 5.7 million barrels. Analysts had been expecting only a rise of 1.4 million. Even stockpiles of gasoline increased to 800,000 barrels last week. The problem is that traders continue to bid up the price due to increased world demand. Of course, it didn't help matters today when a Goldman Sachs analyst said crude prices could reach $150 to $200 within the next six months to two years.

Similar to last week, the economic data continued the better-than-expected trend. In the first quarter, U.S. productivity jumped by 2.2-percent, which was better than the 1.5-percent that the Street was expecting. The Labor Department report was also higher than the fourth quarter of last year, which was 1.8-percent.

The government also announced that unit labor costs had risen 2.2-percent in the first quarter. This inflationary metric was below analysts' forecasts of 2.8-percent. The new data is very good news for the economy and the Fed's inflation fight because higher productivity helps to counteract elevated material and energy costs.

Also on the day, the National Association of Realtors' Pending Home Sales Index dropped another 1-percent in March. Although this reading was in line with expectations, the report hit a record low for the second straight month. The reading of 83 in March was 20-percent below the same period one year earlier. Despite the weak report, we were pleased that the number was not worse than the Street's expectations.

This afternoon brought some depressing news when the consumer credit report showed a drastic increase in consumer debit. Instead of the $6.0 billion that was expected, the figured spiked to $15.3 billion in March. However, it's important to realize that this number is extremely volatile and subject to massive revisions.

Today's Economic Data

It was a good day for the dollar on Wednesday. It rose against both the euro and the yen.

The Dow Jones Industrial Average held up fine until the afternoon trading took stocks dramatically lower. By the time the closing bell rang, the index shed 206 points and finished the session at 12,814. It closed just above a decent support level on the chart, but if oil continues to climb, the Dow will likely remain under pressure.

The S&P 500 fell 1.8-percent on the session. The 25-point drop took the index down to 1,392. The next decent support level on the chart is almost 12 points below Wednesday's closing price.

By the time the selling ended on Wednesday, the Nasdaq Composite was 1.8-percent lower. It dropped 44 points on today's session and finished at 2,438. It sliced through a good support level at 2,500 and appears to be headed towards 2,400. We would like to see a bounce or at least a let-up in the selling once it hits this level.

Although it was an ugly day across the board, our spreads held up fairly well. As long as we can avoid multiple days of heavy selling, we should be in good shape. With another day now on the books, we have only seven trading days left in our AZO spread and six in our RUT and MNX spreads. With so few days left in the cycle, time is on our side. As long as volatility doesn't spike, the time decay will start to act like an ice cube in the hot sun. The time decay will eat away exponentially as we get closer to expiration. This is when it gets fun as an option seller. Let's take a look at all of our open spreads in detail...........

CURRENT MAY SPREADS

CLOSED MAY SPREADS

RUT 650-640 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$50.00 per contract profit potential

The RUT was not adverse to all of the selling in today's session. It lost 13 points on the day and closed 1.86-percent lower at $716.21. This took the index below a decent support level (and old resistance) on the chart. It closed just above its 20-day moving average (light blue line), which is also support in its upward sloping channel line. We will be watching to see how it handles this support on Thursday. Even with today's selling, we're still in good shape in this spread due to our 66-point cushion.

MNX 175-170 MAY BULL PUT SPREAD (15 contracts entered on 04/21/08)

$40.00 per contract profit potential

The MNX also fell with the rest of the Market on Wednesday. It declined 3.92 points and finished the session at $195.14. The troubling part is that the index broke below its 200-day moving average (black line) on the chart. We were hoping that this line would continue to provide strong support for the MNX. Although it closed just below it, we're still holding out for a bounce in tomorrow's session. Despite today's loss, we're still in great shape in this position. The MNX is trading 20 points above our "short" strike price with not a lot of time left in this spread.

AZO 115-110 MAY BULL PUT SPREAD (15 contracts entered on 04/28/08)

$50.00 per contract profit potential

Our AZO spread was the one we've been concentrating on the last few days. Although we still have plenty of breathing room in this spread, AZO has given us very large candles. The wide trading range always gives us a little caution. Of course, the stock was propelled higher yesterday after getting an analyst's upgrade. While it turned in another long candle today, it only lost 0.34-percent on Wednesday. This strength on such a down day is very encouraging. Today's $0.42 loss took the stock down to $124.19. This gives us almost 10 points of cushion heading into the final seven trading days. As usual, we'll continue to keep a close eye on this one.

As always, Trade Happy and Trade Smart

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