Weekly Binary Options Briefing 6/3-10/2013 – Stocks Continue Last Week’s Move Lower

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

Stock markets resume their push lower from last week.  Summer trading volumes start to weigh on volatility.  Monthly Non Farm Payrolls could lead to downside position squaring before Friday’s release.

Stocks Continue Last Week’s Move Lower

The S&P 500 is continuing with the bearish tone that we started to see late last week, as investors continue to grapple with the possibility the US Federal Reserve will begin to remove monetary stimulus from the economy.  In addition to this, volatility is starting to slow as we head into the summer months, and this time proximity is being used as an excuse by some traders to take profits while stock markets are still elevated.  We have already seen some negative macroeconomic stories, with US manufacturing numbers coming in worse than analyst expectations. 

        This data came in the form of ISM manufacturing, and posted the biggest contraction in four years.  This essentially suggests that corporate activity will begin to slow and that we will see reduced demand for energy products.  Commodities traders should pay more attention to oil prices this week on the back of this, as there is now an additional reason to sell with valuations holding below the psychological level at 100. 

The Week Ahead    

 In the week ahead, we will have interest rate decisions from the Bank of England and the Reserve Bank of Australia, GDP figures out of the Eurozone, and Non Farm Payrolls out of the US.  Volatility is likely to be subdued unless we see position squaring (particularly ahead of NFPs) trip profit stops and push prices lower.  NFPs are expected to show a largely unchanged result, with 168,000 new jobs added (after the 165,000 seen last month). Expect a positive result to have a short term bullish effect on the US Dollar, followed by weakness on safe haven selling.  A negative result should send the S&P back through short term support levels and send stocks on an early trajectory to have a bearish June month.  The central bank rate decisions will also be important for determining the long term prospects of the AUD and GBP, as both central banks could signal concern and the potential need for additional policy easing before the end of the year.

My Trade Ideas (Trade on CommuniTraders):

 1. The most recent weakness in the US ISM manufacturing data has sent the USD/JPY back through its key psychological level at 100, and I will use this retracement as a new opportunity to get long Dollars.  Central Bank policy remains supportive and with the massive weakness we have seen recently in Japanese stock markets, there is an increased likelihood we will start to see increased rhetoric from the country’s finance ministers to calm the volatility.  Look to enter into weekly CALL options in the USD/JPY at 98.80, looking for at least a test of 100.  Risk here comes with Friday’s NFP numbers and if gains are seen prior, close the position early if your broker allows this.

2. For stock trades, I will look to play off of the recent Moody’s upgrade for the US financial sector and buy monthly CALLS for Morgan Stanley (MS) at 25.30.  In addition to the positive fundamental change, prices have pushed through the 78.6% Fib resistance level from its medium term decline, and this targets a full retracement before the end of the year.

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