Tip from the Geek – And The Trend Goes On
Top 5 Trading Signals 10/06-13/2014 by the Geek
September was a tough month for me, for traders and investors. Economic trends were up but the market was faced with weakness at home and abroad not to mention rising geopolitical tensions on multiple fronts. Many, me included, were looking for a continuation of the summer bounce once September started but it did not come, what came was a 3-5% correction in the major indices. A correction that opened the opportunity for trend following entries and for profits. Last Friday the NFP numbers confirmed the longer trends in labor and the US economy, sparking a bounce that took the S&P 500 and Dow Jones Industrials surging in their biggest day of gains in over 6 months. And this right after the bounce from long term support that occurred just the day before.
Price action in the major US indicex is positive and pointing to another leg higher in equities. Previous trend bounces have taken the S&P 500 as much as 200 points higher in the near to short term with the cumulative affect being a more than 35% gain in the index over the past two years. On tap this week is not a whole lot. There are some global concerns but they are starting to fade from the spotlight, at least in terms of the market. There is not much in the way of economic data for the US or elsewhere save the FOMC minutes on Wednesday. This could be a market moving event. After that there is wholesale inventories and consumer credit but neither of those is likely to spook the market. Earnings also starts this week. Alcoa reports on Wednesday, another reason to see it as a pivotal day for the market. The aluminum giant has been trending higher for more than a year and is now consolidating for what looks like a test of resistance.
1. The Market Bounced And The Trend Continues
S&P 500
Call/Put = Call
Entry = Below 1975
Expiry = One Week
My Trading Advice
The S&P 500 made a text book bounce from the long term trend line last week. This trend line dates back for over 2 years. It started before the market broke above the secular bear resistance. It has produced multiple trend following signals in the past and is likely to produce one now. Of course, there are many pundits out there who are screaming for a correction and they could be right, they just haven’t been so far. Economic and earnings trends are positive with no end in sight so I think it unlikely that a prolonged period of selling will ensue from here.
What basically happened last week is that global fears weighed the market down and then the NFP proved that the US is not yet affected, strong and growing on it’s own. There is reason for concern but until that changes I remain bullish. This week I am trading a call on the early trend following signal presented with last week’s bounce. My target entry is below 1975 with one week until expiry.
2. Gold, Gold, Gold
Gold
Call/Put = Put
Entry = Above $1195
Expiry = One Week
My Trading Advice
Gold fell again last week, counter to my intuitions for a bounce. Economic data has finally pushed the metal down to it’s long term low and now is the time to really start watching. Now that gold is trading beneath $1200 and at long term lows there is a chance for a bounce, a consolidation or a continuation. I am in the continuation camp based on several factors; economics are rising, interest rate hikes are less than 12 months away, dollar is rising and the Fed will be hard pressed to say that the the US economy is not gaining strength. I am trading a put on gold with a target entry above $1195, as close to $1200 as I think I can get, on the expectations that the FOMC minutes on Wednesday will be hawkish and therefore bearish for gold.
3. I’m Not Giving Up On Germany
DAX
Call/Put = Call
Entry = Below 9300
Expiry = One Week
My Trading Advice
Germany has been having a hard time, what with weak growth and low inflation rampant around the EU and Russia knocking on their back door. The DAX index suffered pretty hard in September but looks like it will be bouncing along with the SPX. Russian sanctions and the natural gas dispute will remain the biggest risks along with economic data. This week is light on data, lets see is it will be light on Putin. I am trading a call on the DAX with a target entry below 9300 and one week until expiry.
4. Oil At Near Term Bottom
USO/Oil ETF
Call/Put = Call
Entry = Below $33.75
Expiry = One Week
My Trading Advice
Oil moved lower last week and broke the $90 level for the first time since January. Early trading this week saw oil prices move lower again, testing these lows but it is oversold in the near term. The charts show an asset near long term support with increasingly weak technicals and the chance for a bounce. Rising supply is helping to keep prices low but OPEC, geopolitics and a growing US economy will bring it back up. I am trading a call on the USO oil tracking ETF with a one week expiry and target entry below $33.75.
5. Surfing The Yen Wave
USD/JPY
Call/Put = Call
Entry = Below 109.50
Expiry = One Week
My Trading Advice
The yen has been sliding on a wave of sentiment driven by weak Japanese data, Abenomics, strong US data and the end of tapering. The pair finally hit the long term target of 110 last week and is now trading below that as traders take profits. Longer term the pair appears to be setting up for a test of resistance that could lead to a break above 110. I am trading a call on the pair this week with a target entry below 109.25 and one week until expiry.
More Tips by the Geek – 10/06-13/2014 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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