Originally posted by R.Cox.
Looking at next week’s data calendar, there is virtually nothing to suggest that we will see the same fireworks as last week. In the US, we will have the Advanced Retail Sales numbers on Wednesday, and this will be useful for gauging direction in stock markets next week. In the Eurozone, we will also see Wednesday data, with Industrial production figures. CPI figures for Germany, the US and the Eurozone as a whole will also be released during the week but this is unlikely to generate much interest for short term traders.
Stocks will likely see some upside movement in the beginning of the week, as positive momentum carries over into Asian trading on Monday. Any rallies here, however, will be viewed as an opportunity for selling and I will be looking for weekly PUTS in the S&P 500 into the upper 1550s.
This is a contrarian position in a very strong uptrend, but downside risk is much greater than upside potential at this stage, and this favors PUTS for the week.
The GBP/USD has now clearly given in at the 1.50 level and there is little to suggest that we have found a bottom in this currency pair. If we do have a negative week in stocks, the US Dollar should remain supported so I will be looking for weekly PUTS in the GBP/USD at 1.5020.
Risks for this trade would be seen if we see comments from the central bank suggesting that inflation levels are too high to implement another round of easing stimulus, but comments like this would be relatively surprising.