Weekly Binary Options Trading Briefing 1/7-14/2013 – Stock Markets Rally as Doomsday Scenario is Avoided

Binary Options Trading Recommendations for the upcoming week –  Market Information and Trading Tips


Stock markets around the globe finished the week strongly in positive territory, with most of the major indices closing at long term highs.  The S&P 500 had its best weekly performance in 13 months, rising by 4.6% to reach levels not seen since the end-of-year peaks in 2007, while the FTSE and Euro Stoxx 600 closed at its highest levels in nearly 2 years.  The gains were matched in Asia as well, with the Nikkei 225 posting its best close since Q1 2011, as manufacturing numbers out of China showed expansion for a third consecutive month, giving a more positive outlook to the region’s productivity potential into the new year.


        But the major reason for investor optimism came with the agreements reached in the US Fiscal Cliff negotiations.  This agreement did fail to meet the technical deadline but still manages to hold off the “doomsday scenario” where automatic tax reductions and spending cuts would have led to an almost certain recession.  The other main events for the week came from the Federal Reserve (which hinted that the QE bond purchases will end mid-year 2013), and the US Non Farm Payrolls, which showed a relatively strong number (but was accompanied by a higher than expected Unemployment Rate). 


Correlation Breakdown in Stocks and the US Dollar

        One of the most striking market events this week was the breakdown in the traditional correlation that is seen between stock markets and the US Dollar.  Equities typically fall into the “risk” markets category while the US Dollar is a safe haven asset, bought up when uncertainty is the prevailing theme.  Because of this, these two assets perform well in opposing environments.  This week, however, both assets rallied and in order to decipher the reasons for this, we must look at all three of the main market drivers as the mostly positive economic data and the Fiscal Cliff resolution brought a sigh of relief to equity investors while the stimulus program comments from the Federal Reserve had the reverse effect.  Looking ahead, attention will start to focus on the next round of corporate earnings.  The first major companies to report will be Alcoa, which will be reporting on Tuesday and Wells Fargo which will come on Friday.



My Trading recommendations in 50 words

1.  This week we will look at two stock picks, with corporate earnings season likely to be the next main driver of market sentiment.  Tuesday’s Alcoa report is expected to show a quarterly profit of 7 cents per share and with the company’s history of beating analyst estimates, I will enter into weekly Alcoa (AA) CALLS in the 9$ region.


2. The other main story will be Wells Fargo, which has an attractive P/E below 11 and has yet to retest its yearly highs at 36$.  I will be looking to enter into weekly calls in Wells Fargo (WFC) near 34$, as a new yearly high could be breached if earnings come in strongly. 



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