Weekly Binary Options Briefing 5/20-27/2013 – S&P500 at Another Record

Binary Options Trading Recommendations for this week – Markets Information and Trading Tips

S&P posts another record, even with a few earnings disappointments.  Market attention to return to macro data and comments.  Fed speeches next week could lead to profit taking.

S&P 500 at Another Record but Fed Speeches Could Turn the Tides

The S&P 500 posted another all-time high as investor confidence remains elevated and the US Dollar Index has moved bullish territory that has not been present in the market for 3 years.  For forex traders, this strength is broad best, with significant weekly gains made against the EUR, JPY, CHF, and AUD.  Clearly, this is a broad based move for the currency and momentum buying is likely to continue into at least the early part of the week. 

        We are still in earnings season, and most of the results thus far have been better than early estimates from analysts.  We did see some negative earnings stories last week, however, as both Dell (DELL) and JCPenney (JCP) showed weakness in relatively diverse sectors.  The numbers from Dell were particularly jarring, as shareholder disputes and a generally weak PC market have forced the company to consider new strategies.  Dell’s profits for the fiscal first quarter showed a decline of 79% and while the company’s valuation from a P/E perspective (under 10) remains favorable when compared to some of its peers the broader sector climate and key chart failures make the stock look vulnerable at current levels. 

 The Week Ahead   

 In the week ahead, markets focus will shift from earnings to market commentaries from key members of the US Federal Reserve.  These events are front loaded in the first half of the week, with the main headlines likely to be generated by Wednesday’s testimony before Congress by Fed Chairman Ben Bernanke.  Any suggestion that the Fed is content with how the economy is progressing, and that the body will begin phasing out of its current stimulus programs will bring renewed buying into the US Dollar and weigh on stock markets.  In stocks any downside momentum could see major follow-through given the elevated levels we are seeing at the moment. 

My Trade Ideas (Test on CommuniTraders):

1. Moves in the Dollar (while largely expected) have been relatively extreme, and this makes it difficult to find suitable entries for this week.  With this in mind, I will look elsewhere, at the EUR/GBP, as the latest rallies are unsupported by fundamentals and are now coming into significant short term resistance levels.  I will look to enter into weekly PUT options at current levels, roughly 0.8465, targeting a retracement back into the low 0.84s.  Psychological resistance at 0.85 should hold if tested.

2. For stock trades, I will look to play off of the earnings miss in Dell (DELL).  Sector reports show the biggest quarterly declines in PC sales since the numbers started being recorded.  Shareholder disputes in taking the company private are adding extra costs, and this is not a bullish scenario for the company longer term.  Critical failures at Fib resistance (in the mid-14s) add the the technical arguments for PUTS, and the bias is to the downside as long as this resistance area remains intact.  I will be looking to enter into monthly PUTS in DELL on a clear break of support at 13.10.

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