Originaly posted by Michael Hodges.
S&P 500 Returns To Trend
Call/Put = Call
Entry = Below 1555
Expiration = End of the month
All the negativity and selling in the S&P last week did not break the long term up trend. It did bring the index back down to trend or near enough. Taking the long term charts (weekly bars) by themselves I might turn a little bearish because my indicators are getting a little weak. The last few times this has happened 5-8 weeks of selling followed. If this were to happen I would expect the S&P to fall as far as 1500, maybe a little lower, before finding a bottom. I donít think that this set up is going to happen this week but it could in the near future. The index is at a very significant resistance level and potential turning point. For now I am still bullish in the nearer term.
When I move down to my daily charts I see a market making what appears to be a normal return to trend. The first quarter was pretty strong, not booming but strong. The market trended up because joblessness came down significantly, housing improved steadily and so far we seem to have weathered the Fiscal Cliff and Sequester. Now that the index has returned to trend the data can begin to support the market again. This weeks data should support the same steady improvements going into the GDP report and this should lift the market to at least retest the highs around 1600. I am trading calls with end of the month expiration and entry below 1555.
Euro Blowing Off Steam?
Call/Put = Put
Entry = Above 1.3000
Expiration = End of the monthYen Gets The Nod, Slide Slide Slide
The EUR/USD pair made a nice little blow-off top last week. This week started with the pair breaking the 30 day moving average. The topís close and the break below the moving are both below a Fibonacci retracement and bearish in my opinion. This trade could go as low as 1.2884 on a firm break below the moving average. I have also heard more chatter about a possible rate cut by the ECB, another source of concern for bulls in this trade. It is possible we could hear more about this week as well. Weak data in Europe and/or strong data in the U.S. will help this trade move down. I am trading puts with an entry above 1.3000 and an end of the month expiration.
Calls/Puts = Calls
Entry = Below 100
Expiration = End of the month
The G20 gave their approval to Japans monetary policy. This signals a go ahead of the aggressive easing policies that have been driving this trade. The BOJ is meeting again later this week and could make further moves to devalue the yen. The USD/JPY pair is bumping up against the resistance of 100 but is indicated higher with the support of policy and the international community. I am buying calls on the USD/JPY with an entry below 100 and an end of the month expiration. It is possible the trade will break out sooner than expected. If this is the case I will enter a half size position and then reevaluate for additional entry.