Tip from the Geek – Top 5 Trading Signals 08/18-25/2014
Easing Its Way To New Highs
Reports of easing tensions between the Ukraine and Russia helped to rocket the global markets higher on Monday morning. European and US equity indices moved close to a full percentage point higher in the early parts of this week breaking above near term resistances that have been in place for over a month. These resistances are linked to a variety of factors but most importantly the Russia/Ukraine chess game being played by Vladmir Putin. The Russian despot has had an unruly affect on the market ever since the Ukrainian Incursion began with his yes yes yes no no no mentality. One day he seems poised to attack, or help attack and then one day he says he wants the violence to end and that humanitarian aid is on the way. This weekends development, according to headlines I read, is that no real progress has been made except on the aid front and even that is not finalized yet. What this means for us as traders is that this problem is not over and has a high likelihood of affecting your trades this week.
Now, moving on to what is happening in the market is that earnings season is mostly over and so far everything is looking good. More than 60% of companies have reported sales above estimates with over 70% reporting earnings above estimates. The average earnings growth for the quarter is over 7%, more than a full percent above expectation going into the season. This week there will be important earnings from the retail and housing sector. Data last week was OK, not too hot, not too cold, just right. This week there is some important housing data as well as FOMC minutes, Philly Fed and the Leading Indicators. All in all the data and the earnings should be in line with trends and that should keep the markets moving up. So long as geopolitics does not overpower us once again.
1. S&P 500 Moving Higher
SPX
Call/Put = Call
Entry = Below 1965
Expiry = One Week
My Trading Advice
The SPX has been in the process of a correction to trend and is now firmly bouncing. The geopolitical situation takes the blame for causing it but the result is a nicely oversold market within a longer term uptrend. The index is making its bounce from a long term trend line and now moving up through resistance. The move is supported by the indicators and looks set to run on for the next couple of weeks. Of course, there are risks ahead but since we can not know the future must trade based on the information before us.
The main risk this week is in the Ukraine. Escalation, fighting with Russia, Russian aggression or other overt moves will all have the ability to send the market skittering away seeking safety. After that risks include earnings, data and the fed. The earnings wont matter as much as the data, the data should be in line with trends but I don’t have a lot of expectations for any one piece to be stellar or not. The Fed releases their minutes on Wednesday and that I think will be the real market signal. The minutes should reveal how the fed thinks about the market and the state of policy, in particular interest rate hikes. I am trading a call on the SPX this week with an entry below 1965 and one week until expiry.
2. Gold Teetering
Gold
Call / Put = Put
Entry = Above $1300
Expiration = One Week
My Trading Advice
Gold prices have been teetering on the verge of $1300 for several days. The economic data supports stronger dollars and weaker gold while at the same time the geopolitical flight to safety that has kept prices elevated is diminishing. Early Monday trading had gold prices below $1300 and I see it moving lower as the Ukraine issue dissipates, or at least loses importance in the eyes of the market. I am trading a put on gold with a target entry above $1300 and one week until expiry.
3. The DAX Got Beat Up
DAX
Call/Put = Call
Entry = Below 9225
Expiry = One Week
My Trading Advice
The DAX got beat up over the last month as data and the Ukraine/Russia standoff both pressured out look for growth. The index corrected roughly 10% in that time and is now in the early stages of recovery. Weakness seen in the EU and German economies last quarter should reverse this quarter as global economies in the US and China grow. I am trading a call on the DAX this week with a target entry below 9225 and one week until expiry.
4. Supply Is Brimming
USO
Call/Put = Put
Entry = Above $35.50
Expiry = One Week
My Trading Advice
Oil prices took a big hit last week as rising storage levels, rising supply and declining risk combined to spark a massive sell off. WTI declined $2 last Thursday and then another $1 early on Monday with no reason to suspect it may move higher in the near term. I am trading a put on the USO, the oil tracking ETF, with a target entry above $35.50 and one week until expiry.
5. Back Into The Euro Trade
EUR/USD
Call/Put = Put
Entry = Above 1.3375
Expiry = One Week
My Trading Advice
I have decided to get back into the EUR/USD. This was my worst asset last year and caused me many losses. I have been studying it’s movements and am confident of my entry, if not my outcome. The pair has been trending lower since weakness in the EU was spotted a few months ago. The pair has broken through an important support level and is now consolidating just below the short term moving average. The indicators are consistent with the downtrend and there are not expected changes to fundamentals week. I am trading a put on the pair with a target entry above 1.3375 and one week until expiry.
More Tips by the Geek – 08/18-25/2014 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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