Weekly Binary Options Trading Briefing 1/14-21/2013 – Stock Market Optimism Fueled by Strong Corporate Earnings
Binary Options Trading Recommendations for the upcoming week – Market Information and Trading Tips
Most global equity markets finished in positive territory as corporate earnings suggested a strong performance into the end of 2012. As expected, the two main stories of the week came with Alcoa and Wells Fargo and the profit improvements seen in these reports helped send the S&P 500 to its highest valuations in 5 years. One of the central reasons for optimism came from the fact that this week’s earnings came from very different industry sectors and this is giving investors confidence that the economic recovery continues on an all-inclusive basis.
The S&P 500 rose 0.4% for the week to close above 1470, but the optimism was broad, with the FTSE 100 fast approaching the 6100 level and the Nikkei 225 holding its position above the 10,000 area. European stocks did not fare as well, with the DAX closing lower on the week after pushing above major long term resistance at 7620. In all of these indices, we are trading at elevated valuations on a long term basis and the next wave of market sentiment will be dictated by the ability of corporations to show profit improvements on the already weak analyst expectations.
The recent moves, however, are encouraging because markets are starting to return to full trading strength (normal volume activity) and the fact that these moves are positive shows that a majority of the market is positioning for another bullish move.
Alcoa and Wells Fargo Bring in the Earnings Season
At the moment, analyst forecasts for fourth quarter corporate performance show that companies grew at a collective rate of 2.5%, which is very weak relative to historical trends. Roughly 30 of the companies in the S&P 500 have released their fourth quarter results with 80% of these reports passing analyst estimates. The season began (unofficially) with Alcoa, which posted revenue declines of 2% but this was still an improvement on market expectations and the overall response to the news was positive.
Expectations were generally low to begin with because of the declining aluminum prices seen in 2012. But the improvement on these expectations, along with the company’s positive outlook comments for 2013 push the stock price higher for most of the week. The other main story was Wells Fargo, which was a more positive story, with fourth quarter profits rising 25% on increased loan activity. Ahead next week, the earnings scheduled is loaded and this will likely lead to increases in short term volatility during the week. The main names to watch will be General Electric, Intel, JP Morgan, Citigroup and Bank of America.
My Trading Recommendations in 50 words:
1. For more than 6 months I have been holding a long spot position in the EUR/CHF, as the Swiss central bank enacted a price floor in the currency pair at the 1.20 level. Moves (upward or downward) have been scarce most of this time but in this last week, we saw a major upside push, which is likely to continue long term. Now, we can start looking at monthly CALL options in the EUR/CHF at current levels now that the market is finally making some decisive movements.
2. With earnings expectations tepid at best, it is likely that many companies will be able to overcome the pessimistic outlook and produce positive surprises. Next week’s earnings calendar is stacked, however, and this makes individual stock plays vulnerable to short term price swings. But with the positive bias, I will be looking for CALLS in the S&P 500 between 1450 and 1460. Risk is obviously for downside earnings surprises this week.
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