Weekly Binary Options Briefing 7/15-22/2013: Stocks Push to New Highs on Bernanke Comments
Binary Options Trading Recommendations for this week – Markets Information and Trading Tips
Bernanke comments suggest stimulus reductions could be delayed. Plosser comments suggest voter dissention at the Fed. Stock rallies need strongrer earnings results to continue to new all-time highs.
Stocks Push to New Highs on Bernanke Comments
The S&P 500 posted a new record close on Friday, propelled mostly by comments from US Federal Reserve Chairman Ben Bernanke, which indicated that the central bank is not necessarily ready to start reducing its monthly stimulus purchases — even if the economy continues to show consistent signs of improvement. These comments (and the minutes from the most recent FOMC meeting) created a stark contrast relative to what was expected previously, as most long-term binary options traders were positioning themselves for the Fed to begin reducing stimulus in September.
This is the reason stock markets (both in the US and globally) were having trouble gaining traction, and the US Dollar was having one of its best bull runs of the year. For the week, the S&P 500, Dow and Nasdaq were all higher by at least 2.2%, and for the Nasdaq and S&P 500 this was the second best week of the year. Given these moves, it should be clear how important central bank comments are in the current environment, and it should also be noted that Philly Fed Governor Plosser offered a disagreeing side (relative to Bernanke) suggesting that stimulus is not necessary any longer, and should be phased out starting in September. Given this dissention, stocks will need strong earnings in order to keep building on the latest rallies.
The Week Ahead
In the week ahead, the macro data docket is very light, but we will see additional meeting minutes from a few central banks and congressional testimony from Ben Bernanke. But the real story is going to center on earnings seasons, which starts to pick up this week and is heavily centered on the financial sector. For the most part, earnings expectations are weak, so it will not take much for companies to better the headline projections. Citigroup leads the way on Monday, and the results could be important in how they set the tone for the week.
My Trade Ideas (Trade on CommuniTraders):
1. The Japanese Yen rallied last week, which is comething of a surprise given the Fed’s general commitment to maintain its monetary stimulus injections. By year end, I am looking for the USD/JPY to rally to at least 105, so I am going to buy into this latest dip in the USD/JPY. This week, look to buy weekly CALL options in USD/JPY at the week’s open on Monday, which should come in near the 99.20 area.
2. For stock trades, I will be looking to trade the upside momentum in stock indices as a whole, and look to biotech favorite Celgene (CELG), which has one of the most impressive drug pipelines in the industry and is looking strong on a technical basis ahead of its earnings release. Given its stable record of beating market estimates, I will be buying on a breakout basis (helped by surges in volume). We sill have some larger stock volatility this week, so I will be looking to enter into the position on any sign of weakness. Buy one month CALL options in Celgene as prices test resistance turned support at 131.50.
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