Tip from the Geek – Great Googly Moogly
Top 5 Trading Signals 10/13-20/2014 by the Geek
“Great Googly Moogly” is one of my favorite quotes and one made famous by Frank Zappa. It is an expression of surprise and fitting my feelings toward the market right now. A variety of near term global fears have mounted into a wall of worry the bulls just have not been able to overcome. The markets hit a new low on heavy selling last Friday despite the upcoming earnings season. The good news is that Friday’s surge to new lows may have been capitulation selling. Yes, geopolitical and economic fears have put a hurting on global growth forecasts but in my opinion only puts the data firmly in position to be beaten. In fact, this week started off with some positive news which may indicate some of the fear may soon leave the market. In China September export data expanded by double digits from last year at this time and in Europe Russia troops have been recalled from the regions bordering eastern Ukraine.
This week is another potentially pivotal week for the market. It is the true start to earnings season. Alcoa, last week, was the harbinger of earnings season but it will be the banks this week that provide a real chunk of evidence for the market. Along with a few other non-financial high profile names the week will be dominated by Wells Fargo, Citigroup, Bank Of America, JP Morgan and many other small and regional financial institutions. The banks are expected to post one of the highest growth rates in terms of profits with the average estimated gain among S&P 500 companies a little over 6%. Alcoa, as the lead-in to the season beat the estimates by nearly a dime, roughly 35% above expectations. If this is a sign of the season then I am very, very eager to see what the rest of the season brings.
1. Supported Or Not
S&P 500
Call/Put = Call
Entry = Below 1905
Expiry = One Month
My Trading Advice
The S&P 500 fell last week and fell hard. It, along with other major global indices were hit by lowered global growth expectations. These expectations are due to weakness in China, slowness in Japan, the affect of sanctions against Russia, ISIS and others. This week at least two of those things received an injection of good news, news that will help to support the indices. The EU for one responded well to the news of Russian troops being ordered away from the Ukraine. The move is not yet confirmed by outside sources but for now we’ll take it at face value.
The SPX is now trading at a long term support level that is in line with the lows set during the lows of August. This is a great point from which the market to bounce, regardless of whether you think the market is moving to new highs or not. This line could remain as support or could become the neck line of a head&shoulders or the base line of a double or triple top. The market could fall from here as well but I don’t think so. The long term economic and market trends are up so I am still bullish long term. I am trading a call this week with a target entry below 1905 and one month until expiry.
2. Rubber Or Gold
Gold
Call/Put = Call
Entry = Below $1225
Expiry = One Week
My Trading Advice
I still think gold will retest its lows before any bull trend starts but this week momentum is to the upside. Last week the metal bounced off of its long term low like a rubber ball. The lack of meaningful information on when FOMC interest rates will go up has taken a lot of pressure off gold, not to mention the recent pull back in dollar strength. Both of those catalysts will return to the market sooner or later but I am not thinking it will be this week. I am trading a call on gold with a target entry below $1225 and one week until expiry.
3. Consolidation In The Works
USD/JPY
Call/Put = Call
Entry = Below 107.50
Expiry = One Week
My Trading Advice
The USD/JPY has retreated from long term highs over the last week. The rising fear of global slow down caused a slight correction in dollar strength that coincide with the pair touching the 110 level. The pull back was anticipated but deeper than expected and is now trading at a potentially strong support level, 107.25. I am trading a call on the pair expecting a consolidation in the exchange rates as the market weighs the data and earnings over the next few weeks. My target entry is below t107.50 with one week of expiry.
4. Oil Sinks In A Sea Of Sand
Oil/USO Oil ETF
Call/Put = Put
Entry = Above $32.50
Expiry = One Week
My Trading Advice
The Saudis have effectively put the last nail in the coffin for oil as far as prices go. Amid rising supply and storage levels the OPEC member has said that it will not curb production to support prices and will use lower prices to defend market share. Oil fell to a new low on the news and is going to go lower. I am trading a put on the USO with a target entry above $32.50 and one week until expiry.
5. Feeding The Fear
VIX
Call/Put = Put
Entry = Above $21
Expiry = One Week
My Trading Advice
The rising market fear and sell off in the market has presented on of my favorite trades. The VIX has shot up to long term highs, a move that I always like to fade. It may take a couple of days but this move almost always results in a sharp pull back in volatility. I am trading a put on the VIX with a target entry above $21 with one week until expiry. Earnings should go a long way toward taking some fear out of the market.
More Tips by the Geek – 10/13-20/2014 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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