Binary Options Weekly Briefing 17-22/9 – Stocks Post New Yearly Highs after Fed Stimulus Injections

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

Equity markets around the globe had a strong end to the week as the US Federal Reserve helped to lift investor optimism by explaining its intention to buy mortgage securities in its third round of quantitative easing.  Specifically, the Fed explained on Sept. 13th that each month, the US central bank will purchase $40 billion worth of mortgage debt in the US as a means for reducing the nation’s Unemployment Rate and supporting GDP growth prospects into the end of the year.

       The market’s reaction to this was forceful, with most of my previous trading calls (for example, higher gold and oil prices, a stronger Euro and a weaker Yen) playing out as the S&P 500 rose to its highest levels since the peaks seen in 2007.   Essentially, this latest move by the US Federal Reserve has brought in fresh demand for riskier assets while at the same time stoking inflation concerns for the US economy.  Higher inflation in the US after quantitative easing is a negative for the Dollar while being a positive for gold and oil, which are priced in US Dollars (making them inversely correlated).

       Some of the most interesting moves, however, were seen in stocks, with the S&P 500 completing a two week rally which added 4.2% to company valuations in the index.   Prices closed th week just below the 1466 level, which is the highest peak of the year and currently 6.8% below the all-time high set in late 2007.  As a whole, the S&P 500 has added 17% so far this year, with tech companies and financial stocks both showing gains of 23%, making these sectors the highest performing areas in the US benchmark index. 

German Court Look to Support Eurozone Bailouts

       Adding to the bullish sentiment was the latest decision from Germany’s constitutional court, which delivered its ruling on proposals to stop the ECB’s attempts to deliver additional loan funding to troubled economies in the region.   The minority opinion (which sought to implement greater austerity requirements before additional bailout funding could be disbursed) was out-voted on the issue and this helped to propel the DAX to new yearly highs of its own, just below the 7400 level. 

       The Euro itself was also a strong beneficiary of the decision and has now posted a clear reversal into the mid-1.3150s.  I expect the optimism to carry into at least the middle of next week, but investors who are already long these assets should look to capture gains before the major profit-taking moves are seen. 

My Trading Recommendation in 50 Words

Market moves into the end of last week were strong, so I will be looking to trade against these in the short term if further bounces are seen.  Look to establish 1 hour PUT options in the S&P 500 if prices reach 1485.