Tip from the Geek – Which Way To Look

Top 5 Trading Signals 11/17 – 24/2014 by the Geek

There are a lot of conflicting economic situations in the world today so it can be hard to know which way to look. Not to worry, it doesn’t matter. So long as you are keeping track of the bigger picture, focused on your chosen market and trading with the right approach you should be OK. What am I talking about? Positive economic trends in the US, sideways economic trends in Europe, I don’t know what to believe trends in China and now recessionary trends in Japan. The latest read on GDP in Japan is much lower than expected and causing a lot of concern in the market. Many are speculating if Abenomics is really working while others point to even more QE along with structural reform. Without a doubt the tax hike scheduled for December will likely be postponed.

 

The news is actually not too unexpected, Japan is in long term recovery and slowly rebuilding, just like everybody else. European GDP was actually better than expected, a little, but suggests that economy is stabilizing. It all comes down to how the economies react with each other and the one I watch most closely, the US, is attached to those, but not tied down to them. In fact, the improving US economic picture helps the others avoid even worse times than they might have otherwise. US trends are on the rise across the board, indicating a slow and steady recovery that is building on itself one data point at a time. While I am cautious in the overseas markets, I am bullish on the US.

 

 

 

1. Economy Gaining Momentum

S&P 500

Call/Put = Call

Entry = Below 2040

Expiration = One Week

 

 

The S&P 500 has been trending at new highs for over a week while the indicators have moved back to more normal levels. This means a retreat in momentum and a bearish crossover in stochastic, two signs that could mean an impending bearish signal. They could also be setting up for bullish trend following entries which is the more likely case. The fact that the market has trended at new highs while the is happening says it all for me. The market is holding new highs in consolidation, a holding pattern if you will, while it waits for the next confirmation of the economic trends.

 

That confirmation will be the FOMC minutes scheduled for release on Wednesday. The minutes, along with housing and inflation data also released this week, will most likely reaffirm the current state of the economy. A state of steady growth that is pointing to a strong holiday season. I am trading a call this week based on the price pattern. The market is trending higher and setting up for a bull flag, a flag waving the way higher. My target entry is below 2040 with one week of expiration.

 

 

 

2. Gold May Be Bottoming

Gold

Call/Put = Put

Entry = Above $1290

Expiration = One Week

 

 

Gold may be bottoming, but that doesn’t mean it is at the bottom now. Last week’s, Friday to be exact, rally in gold was driven on short covering and is a good sign the bottom is at hand. This does not mean it is going up from here. At this time gold prices are hovering just below resistance at $1190 and not likely to move higher. There is an argument for higher gold prices but it is a long term proposition, not a near term thing. In the near term strong dollar is putting the hurt on gold prices and I am trading bearish this week. My target entry is above $1290 with one week of expiry.

 

 

 

3. Oil Spread Thin

USO/Oil ETF

Call/Put = Call

Entry = Below $28.75

Expiry = One Week

 

 

Oil prices have tanked in the last month but bearish traders are spread thin. The down trend has been driven on price manipulation and OPEC speculation as much as anything else. The OPEC meeting is a likely turning point for the oil market and the even I am trading around, mostly because I just don’t see OPEC supporting lower prices unless someone in OPEC wants the cartel to split up. I am trading a call on the USO with a target entry below $28.75 and one week until expiry.

 

 

 

4. Abenomics Tested To The Max

USD/JPY

Call/Put = Call

Entry = Below 116.25

Expiration = One Month

 

 

Weak weak weak Japanese GDP is pointing to a renewed round of Abenomics. The data shows that the current round has worked, but also that the consumption tax has stymied the improvements. This will for sure lead to a postponement of the next tax hike, possible increased QE and a weaker yen. Not to mention that the dollar is gaining strength on its own. I am trading a call on the USD/JPY with a target entry below 116.25 and one month until expiry.

 

 

 

5. Draghi Weighs On Euro

EUR/USD

Call/Put = Put

Entry = Above 1.2480

Expiration = One Week

 

 

The Euro has been losing ground to the dollar steadily. The end of US QE and the enactment of EU QE is the reason, which is why Monday statements from Mario Draghi are going to help send the pair lower. Draghi says that buying government bonds is a possibility in order to help shore up the EU economy; more QE equals weaker euro and stronger dollar. I am trading a put on the pair with a target entry above 1.2480 and one week until expiry.

 

 

 

 More Tips by the Geek – 11/17-24/2014 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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