Tip from the Geek – Rally On Dude, Rally On!
Top 5 Trading Signals 11/10 – 17/2014 by the Geek
The US market rallies on. Earnings and economic data are lifting the market while a lack of bad news is allowing it. This is a combination that equals higher index prices in the near to short term. Last week the indices broke to new highs and this is likely to continue on into the future. What is driving it? A strong labor market. All the data points to a strong labor market and one in which momentum is building. The non payrolls and unemployment numbers prove my point. The NFP was a very nice and very steady 230,000. This isn’t overly strong but is enough to maintain current trends. Adding weight to the numbers is the trend of upward revisions that has added over 200,000 jobs to the past three months headlines. The momentum can be seen in the unemployment number, 5.8%, an unexpected drop.
This week will be dominated yet again by labor data, the initial claims and JOLTS figures. Other than that it is a fairly light week for data. Friday is the biggest day and includes retail sales, Michigan Sentiment and Business Inventories. Earnings will also be on tap. Nearly all the S&P 500 companies have reported by this point in the cycle but there are still quite a few names with some market moving potential left to report. We may also get a surprise lift from commodity based sectors like gold and oil. Both may be at a near to short term bottom, a bottom which could help the indices simply by halting the fall experienced by the stocks in the respective sectors.
1. S&P 500 Drifting Higher
SPX
Call/Put = Call
Entry = Below 1930
Expiry = One Week
My Trading Advice
The S&P 500 is drifting higher with a lot of tail wind. The economic trends are up, earnings trends are up, Holiday season outlook is good, market momentum is strong and there is a real chance that commodity based stocks will begin to add their weight to the rally as well. In fact, I just can’t think of a reason for the rally to stall in the near to short term. Of course, there are some reasons to think that it might stall in the future but at this time the market is moving higher.
Looking at the charts we can see the SPX moving higher, but maybe losing a little steam. The candles are getting smaller and smaller while momentum is receding. This can sometimes indicate a top or a peak but not always, not even close. Also look at how extreme momentum is. It is in decline but even at current levels is much stronger than it has been over the past 12 months. This is a sign of underlying strength in the market and one that is still moving higher. I am trading a call on the SPX this week with a target entry below 1930 and one week until expiry.
2. Gold At A Bottom?
Gold
Call/Put = Call
Entry = Below $1170
Expiry = 3 days
My Trading Advice
Gold hit a bottom last week, what kind of a bottom is yet to be determined. The metal surged more than 2% Friday creating a long, white, strong bullish engulfing candle. The candle swallowed up 5 or 6 days of prior trading but is still below resistance. The bounce is strong with near term momentum in its favor but just how it will or can go is highly questionable. So, for this week I will be trading a call on gold but with only three days until expiry and a target entry below $1170.
3. Yen Gains Some Strength
USD/JPY
Call/Put = Put
Entry = Above 114
Expiry = Three Days
My Trading Advice
The USD/JPY hit a top last week and is now in retreat. The combination move between FOMC ending QE and BOJ enhancing that caused the sharp move up to 115 and is now in consolidation. The pair is dropping from resistance with indications of a move lower. Support is predicted around 112.50 but sideways action is predicted over the next few weeks. I am trading a put this week, but with only 3 days until expiry, in order to capitalize on this pull back. My target entry is above 114.
4. Don’t Get To Bearish On Oil
Oil/USO
Call/Put = Call
Entry = Below $30
Expiration = One Month
My Trading Advice
Oil is trading at low levels and by many accounts expected to go lower. I just don’t think it’s going to happen. There is just too much international wealth based on the price of oil for the oil producing nations, ie OPEC, to let prices languish too long. Not only that we are entering the cold season for the major industrialized nations, a season in which oil products get used in bulk. I am trading a call on the USO oil tracking ETF with a target entry below $30 and one month until expiry. I chose one month for this trade to give the market, and OPEC, time to do it thing.
5. Germany Floating Along
DAX
Call/Put = Call
Entry = Below 9,300
Expiration = One Week
My Trading Advice
The DAX is still plugging along, above long term support but not really going anywhere fast. All in all the German economy is doing OK, not really growing and not really shrinking, just going with the flow. The thing is,the flow is up. Germany’s major global partners ie the US and China are both growing and the US at least is gaining momentum. The indicators show support along these levels and are setting up for a possible long term trend following signal. I’m still bullish on the DAX and trading a call this week. My target entry is below 9,300 with one week until expiry.
More Tips by the Geek – 11/10-17/2014 Trading Tips On Forum.
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That’s it for this week; Michael will be here next week with fresh trading tips. Meanwhile, we will be testing Michael’s tips to see what kind of an “expert” he really is. All trading assets and expiry times featured in Michael’s trading tips are based on CommuniTraders Binary Options Trading Platform.
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