Binary Options Weekly Briefing 24-29.9 – Stock Rallies Stall after Two Weeks of Strong Gains

Binary Options Trading Recommendation for this week –  Market Information and Trading Tips

Equity markets saw a change in trajectory last week with the S&P 500 stalling after two weeks of gains to close roughly unchanged at 1468.  This creates a Hanging Man candlestick formation on the weekly charts (an early reversal signal when found in an uptrend) and the strong rallies seen so far in September are starting to look vulnerable to at least a downside correction before we see another run higher.  What this price activity tells us is that markets are beginning to reassess the validity of the stimulus-fueled optimism that drove stock prices higher for most of this month, and with most of the major indexes trading at historically elevated levels, it would not be much of a surprise to see some profit taking as investors close long positions into the end of the month (which is also the end of the third quarter). 

Looking forward, the next major question investors will be asking is whether or not recent promises on stimulus programs (from the ECB and US Federal Reserve) will be enough to justify a sustainable rally.  Because of this, economic data is going to take on a greater level of significance (especially employment and manufacturing data) in the coming weeks and months.  But with limited releases seen in the coming week, it looks as though we are in for at least a period of consolidation (if not an all out reversal) as there is little information to support a major rally in the near term.

Next Week’s Data to Provide an Early Indicator

But while next week’s data is mostly second-tier in nature, it will give markets an early indication of where productivity and consumer sentiment is currently headed.  Not only this, we will also get a sense of how forcefully markets will react to negative data (if the numbers are weak), which will be useful when trading days with more significant releases come about.  Specifically, most of the sentiment next week will be dictated by the New Homes Sales, Q2 GDP, and Durable Goods Orders out of the US on Wednesday and Thursday. 

Markets are expecting a slight rise in New Home Sales but strong declines in Durable Goods Orders (-5%) and an increase of 1.7% in GDP(which would be the same result as the previous quarter.  In the Eurozone, most of the attention will center on the German IFO survey, which is expected to show a small increase to 102.7 (a slight rise from the 102.3 seen in August). 

My Trading Recommendation in 50 Words

Oil prices came off sharply at the beginning of last week, and stabilized toward the end of trading so I will be looking to buy one month CALL options at current levels ($92 per barrel), targeting a run back through $100.