Tip from the Geek – Top 5 Trading Signals 08/11-18/2014
Geopolitics Loses Its Appeal
The geopolitical situation lost some of its appeal last week and over the weekend. The correction that began with Putin and the Ukraine situation has also ended with the same. Putin and Russia’s claim that troop movements along the border have come to an end and that they are pulling out sparked a rebound in global equities that carried some Asian and European indices more than 2% higher and others at least 1% higher. One of the stars of Monday’s rebound was the German DAX, climbing just shy of 2% on the renewed hope that the Ukraine situation was not going to spread and that, perhaps, Putin was beginning to see reason. The risk in the market for now remains with Putin and his dealings with pro-Russian rebels but the long term economic trends are taking back control of the market. And, not only has Russia retreated from the market mind, in the near term, so has ISIS. The Islamic uprising in Iraq was dealt some serious blow this weekend and reports say government forces are making headway against the rebels.
This week the market is faced with earnings from a wide variety of retailers and consumer products companies that will give insight into the state of the same. On top of that there is also some key economic data being released. There are two regional reports on manufacturing, New York and Michigan, as well as CPI, JOLTs job openings, import/export prices and monthly official US retail sales data. I would be very surprised for retail sales and other consumer data to be weak simply because of the strength in jobs we have seen over the past few months. Of course this month the ADP and NFP weren’t as good as expected but the long term trends are good and jobless claims are still trending lower.
1. Don’t Knock The Trend
SPX
Call/Put = Call
Entry = Below 1935
Expiration = One Week
My Trading Advice
You can’t knock the trend. You can be dismayed and frustrated by corrections but you just can’t ingnore the underlying trend. Corrections are near term changes in price, driven by near term fears, that some times grow in size from small to large. Once a long term trend is broken then you can start to alter this perspective but that has not happened yet, at least not for the SPX. Long term fundamentals are improving and this is seen in the data. The market may not move up quickly, or in a straight line, but up it is going until those fundamentals change. This morning is a prime example of how a near term fear, Ukraine/Russia/Putin, has lost importance in favor of long term trends. Russia’s withdrawal of troops from along the Ukrainian border relieved fear in the market and allowed it rise, and not surprisingly, from a support level and trend line.
The SPX reached incredibly oversold conditions last week and was ripe for a rally. On Friday it began with the first reports of the Russian withdrawal and that continued into Monday as there are no signs of this being false. Bearish indicators are peaking and in line with long term trend bounces of the past. The stochastic is firing the early, but longer term, weak buy signal along with rapidly shifting momentum. Even if upper resistance caps the movement there are 40 or more points for the index to go in the near term. I am trading a call on the SPX with a target entry below 1935 and one week until expiry.
2. Gold On The Brink
Gold
Call/Put = Put
Entry = Above $1305
Expiry = One Week
My Trading Advice
Gold is on the brink of a rally or decline. If gold is actually bullish it will rise now, even though the flight to safety is deteriorating. If it is not bullish then a sharp drop is likely, and may come at any time. I am of the opinion that gold is not bullish, there is really no reason to get long it, so I am trading a put, as usual. I have been bearish on gold for a long time and am still so now, but with an eye for the longer term and the possibility there may be a bottom in the metal in the mid $1200’s. For today though I am trading a put with a target entry above $1305 with a one week expiry.
3. Oil Supported By Economics
USO Oil ETF
Call/Put = Call
Entry = Below $36.25
Expiry = One Week
My Trading Advice
The fear premium has left the oil pits but now long term fundamentals will come back into play. The long term view of the economy is bullish as is the long term price of oil, simply because of peak oil theory. The USO, and oil, are now trading in a bounce off of support that is indicated higher in the near to short term. I am trading a call on the USO with a target entry below $36.25 and one week until expiry.
4. The Dollar Is Gaining Strength
USD/JPY
Call/Put = Call
Entry = Below 102.10
Expiry = One Week
My Trading Advice
The USD/JPY is moving higher, not so much because of yen weakness but more because of the dollar gaining strength. Economic aside the flight to safety that has been keeping the yen at the bottom of a long term range is dissipating at the same time as global economics show the US recovery taking hold while Japanese growth is still lagging. Last week’s price action confirmed support along the 102 level with indicators that suggest a shift in focus has occurred. I am trading a call on the pair with one week until expiry and a target entry below 102.10.
5. The Rising Tide
Apple
Call/Put = Call
Entry = Below $94.75
Expiry = One Week
My Trading Advice
Apple is a strong stock and strong company no matter how you slice it, no pun intended. With the consumer in growth mode, the economics rising and the stock indicated at support I have chosen it as good candidate for trading a call. I am targeting an entry below $94.75 with one week until expiry.
More Tips by the Geek – 08/11-18/2014 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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