Tip from the Geek – Breaking Out To New Highs
Top 5 Trading Signals 11/03 – 10/2014 by the Geek
The markets are breaking out to new highs. This was foreshadowed by the transports last week, which set a new high ahead of the FOMC meeting. The meeting was much as expected, except for a slightly more hawkish tone, and gave the rest of the market the green light for rally mode. The very next day better than expected GDP numbers for the US 3rd quarter helped spur the rally along and now the broader US markets are all making new highs of their own. The rest of the world is still struggling along but as of now the US economy is improving, the market is rallying and unless something completely unforeseen comes along this should continue on into the end of the year at least. November-December is an historically strong time of the year, both for the economy and the market, and this is confirmed by numerous forward looking indicators.
Two weeks ago the leading indicators rose 0.8%, ahead of the expectations and the third month of increase. Today, Monday, ISM data for the US indicated a strong demand for goods going into the holiday shopping season. Globally ISM data was positive as well, just not as positive as some would have liked. Chinese flash PMI came in 50.4 and a three month high, just not as high as estimated. Likewise flash PMI for the EU was also expansionary at 50.6, just not as expansionary as analyst had predicted. The point is that the globe is still expanding. This is a good thing, perhaps on a region by region basis one is not as strong as the others but together all three are improving.
1. Survey Says….The Trend Is Up!
S&P 500
Call/Put = Call
Entry = Below 2018
Expiry = One Week
My Trading Advice
If I were to take a survey of market participants, and they were to express their opinions as a trade, I would have to say they agree the market is going up. Price action last week was classic bull. The market geared up for a move going into an expected macro-economic event, news was more or less as expected and the rally broke to new highs. You just can’t argue with the data and finally the fed agrees with me. The economic trends are up, the labor market is a lot more stable than the pundits like to argue and momentum is building.
The SPX broker to a new high last week. This is a very bullish sign in the midst of a long term bull market and will lead to more new highs in the future. This week there are several key economic announcements that I expect to help lift this index into the near term. Top of the list is the ADP, Challenger, NFP and Unemployment numbers…the labor data. At this time the index is moving higher with strong, bullish indicators. MACD momentum is at an extreme peak, a sign of bullishness in an uptrend, and stochastic is crossing the upper signal line. I am trading a call on the SPX with a target entry below 2018 and one week until expiry.
2. DAX Still Recovering
DAX
Call/Put = Call
Entry = Below 9300
Expiry = One Month
My Trading Advice
The DAX is in recovery mode after facing a more than 10% correction last month. The index is slowing rebuilding its base with the longer term in sight. Economic data from the region, and from Germany specifically, is weak but still showing signs of activity. So long as Germany can remain steady it stands a good chance of being lifted along with the rest of the world. Support is strong between 9,000 and 9,300 with indicators pointing to higher prices over the long term. Because of this I am using one month expiry on this index, buying a call, with a target entry below 9,300.
3. Gold Sinking Under Central Bank Weight
Gold
Call/Put = Put
Entry = Above $1170
Expiry = One Week
My Trading Advice
Gold is sinking under the weight of central bank policy. The FOMC has been firming up the dollar and now the ECB and the BOJ are engaging in even more QE. Moves by the ECB and most recently the BOJ are extending the losses for their respective currencies versus the dollar, and by default putting downward pressure on gold prices. Additionally, low inflation expectations are keeping longer term investors out of the trade. I am bearish on gold this week and trading a put, my target entry is above $1170 with one week of expiry.
4. Slick, Slippery Oil Trading
Oil/USO Oil ETF
Call/Put = Call
Entry = Below $30.50
Expiry = One Week
My Trading Advice
Oil trading has been tough to judge lately because actual supply/demand issues are back burner to the political tug of war going on over prices. The Saudis and OPEC are top of the list of market manipulating possibilities followed closely by the US. There are several reasons why low prices are desirable on a political basis and with OPEC meeting just ahead it is hard to speculate just what will happen. At least for now the technicals show support along the $80 so I am trading bullish with a call once again. My target entry for the USO is below $30.50 with one week until expiry.
5. What’s Going On Mr. Abe, Mr. Kuroda?
USD/JPY
Call/Put = Call
Entry = Below 113.75
Expiry = One Week
My Trading Advice
The BOJ shocked and stunned the forex world with a surprise addition to QE policy. The bank is expanding the monetary base even more, a move that sparked a near instantaneous drop in yen value. The USD/JPY jumped 6 handles, 6, a move of over 6,000 pips by my count with momentum to the upside. The pair is now above long term resistant with strongly bullish indicators so I am trading bullish as well. My target entry is below 113.75 with one week of expiry.
More Tips by the Geek – 11/03 – 10/2014 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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