Weekly Binary Options Trading Briefing 12-19/11/2012 – Stocks Show Biggest Weekly Declines Since June, Investors Look for Next Direction

Binary Options Trading Recommendations for the upcoming week –  Market Information and Trading Tips

Equity markets in the US saw their biggest weekly drop since June as the market started to focus on the next major event risk (the “fiscal cliff” discussions), after the country’s Presidential elections, which completed on Tuesday.  The declines were widespread, with all 10 industry groups in the S&P 500 posting losses.  Phone companies and utilities saw some of the worst of it, as markets circulated the possibility that potential rises in the dividend tax will deter investors. 

On the whole, the S&P 500 was lower by 2.4% for the week, closing below the 1380 level on Friday.   Things weren’t quite as bad in the Dow, which was lower by 2.1% (closing just above 12,800), but this is still the worst week for both indexes since the beginning of June.  This puts the yearly performances at +9.7% (for the S&P) and +4.9% (for the Dow Industrials). 

Looking for the Next Market Direction

Now that the latest event risk (the results of the Presidential election) are off the table, investors will start to turn their focus to the “fiscal cliff” discussions that will begin next week.  In short, this refers to the potential economic complications (disruptions) that could be triggered if Republicans and Democrats in the US are unable to agree on changes to the national budget before before the end of the year. 

If we remember back to the “debt ceiling” issue last year, we can see that huge market volatility can be created by events like this and with the latest election results (a Republican controlled Congress and A Democrat controlled Senate), there is some real potential for this type of scenario to play out once again.  Most analysts estimates agree with the forecast that the US economy will see significant slowdowns (although the percentage decreases vary) if these agreements are not completed.

As we head into next week and into the remainder of this holiday-themed month, traders should keep an eye on these issues when placing trades, as there is real scope for drastic price changes if there is evidence of a political stalemate.

My Trading Recommendations in 50 Words

 1. Since markets were unable to take any optimistic signals from the completion of the US Presidential election, I am continuing with my downside forecast for the S&P 500.  We are unlikely to get much of an upside retracement at this stage, so weekly PUTS anywhere into the 1390 region are acceptable for options traders.  First downside target is 1340.

2. Our bullish bias in Gold continues but with the latest rallies, better to wait for a pullback into the 1720 area before getting into new weekly CALLS.  Markets are likely to be looking for new safe havens, and this is a prime candidate (no pun intended).

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