Tip From the Geek: FTSE 100, S&P 500, Allianz. One Month Expiry - 10/29-29/11

[Martin Kay]

Storm shut downs WallStreet, American markets are closed for the week. Here is what the geek has to offer us:

Originally posted by Michael Hodges. For the full tips click here.

S&P 500
Call/Put = Call
Entry = below 1400
Expiration = end of the month

I still believe in my previous predictions of another bull leg. The storm will undoubtedly bring volatility to the market when it opens but this should end soon. I believe we are very near the “earnings bottom” and any more downside, especially if there is a sharp drop following the storm, will be a time to buy. Once the storm passes and insurance money starts flowing through the system GDP will surely pick up.

Allianz
Call/Put = Put
Entry = Above $93
Expiration = end of the month

Allianz appears to be topping near long term resistance. Profits and growth has been slowing and now with the added pressure of paying out millions, perhaps billions in insurance claims will surely fall short of expectations. I am buying a put on Allianz if I can get in over $93.

FTSE 100
Call/Put = Call
Entry = 5800
Expiration = end of the month

The European markets were disrupted today because of the US closing. The European markets have been improving in the face of apparent break downs of reform talks. However, each time the EU and IMF reach an impasse with Greece, Spain or one of the other troubled countries they seem to get over it. The third quarter was better than everyone thought, in the US and in Europe and this should continue into the fourth quarter and the first part of next year. I believe that any weakness in the European markets should be taken as a buy signal.

[Grae]

OK. What do you think of Gold, Silver and Dow as Bearish/PUTs for the 4Hour,1Day, 1 Week time periods? Im in the money with Gold and Dow.

Kind regards,
Graham

[Michael Hodges]

I wouldn't be looking to get into puts at this time myself but if you are in the money on puts bought earlier in the month Congratulations! I still think that the markets will be up later this quarter and now is a good buying opportunity. I am watching my support lines very closely, a breakdown will definately change my perspective. Be cautious this week, the storm has messed things up really bad....the market is pretty shaky right now.

[Grae]

That's very true. The markets are now in a Bullish run for Gold, Silver and Dow. I had the trades on the 4h-1 day time frames.

[RCox]

Storm shut downs WallStreet, American markets are closed for the week. Here is what the geek has to offer us:

Not sure what the S&P "prediction" is based on (sounds a little crystal ball-ish) but this latest hourly move in the index after the positive Non Farm Payrolls number has already started to lose momentum and this is looking like an excellent opportunity to get into PUTS for the remainder of the day. We could see some positive hangover as Asia enters the market on Monday but there is much more of an argument for the downside. This latest NFP number was barely high enough to keep up with population increases. Not much to get excited about.

The rallies in Allianz have shown a steady rise and are not looking overly extreme but I am a contrarian by nature and would always be willing to side with a reversal rather than a breakout given the expensive levels. PUTS at current levels have excellent risk to reward ratios so on a purely technical basis, I see nothing wrong with this trade idea.

The FTSE is a sell anywhere into the 5880 area with lower highs and a downward consolidation expected into the end of this year. Market optimism is showing sharp reversals and an extreme lack of follow through any time short term rallies are seen. This shows that sentiment is weak or at least skeptical and traders are looking to book long positions as soon as they get an opportunity to exit at a profit. Today's activity came within 15 points of my PUT entry level and then fell back so this chance for a bearish position looks to have passed.

[Michael Hodges]

As far as the S&P goes there is a lot of reason to expect that corporations won't fare as poorly as they are leading us to believe. Yes, third quarter earnings were light on revenue but we were expecting things to be weak. The good news is that most of the companies have also reported better than expected profits; corporate balance sheets are better than ever, cash flow is good and margins are improving. This is better than earnings growth because it is the precursor to earnings growth. When margins improve, and then revenue improves, profits grow. The fourth quarter, in my opinion, is going to be OK for corporate earnings.

The election, and fear of the fiscal cliff, are what's keeping the markets in check. What I have to believe is that something will be done. It is important for both sides of the political equation... it remains to be seen what is done but something will be done.

Technically support for the S&P is at 1400. This level is coincident with long term support/resistance levels, retracements of the 2008 crash and long term moving averages. As long as the S&P is above this level, and has not broken the long term up trend line, I remain bullish in the longer term (the next 2-3 months) and will be looking to enter calls with monthly expirations when the market is down. It is my first and most important rule in trading to trade with the trend and trade with the trend I must.

[Grae]

One thing is for sure. The USD strengthened remarkably today. I concur on it being the election sentiments (Anxiety or feel good factor?) and some fundamental push from NFP? Some guys say more jobs means less potential for more stimulus...?

[vinayakm]

Not sure what the S&P "prediction" is based on (sounds a little crystal ball-ish) but this latest hourly move in the index after the positive Non Farm Payrolls number has already started to lose momentum and this is looking like an excellent opportunity to get into PUTS for the remainder of the day. We could see some positive hangover as Asia enters the market on Monday but there is much more of an argument for the downside. This latest NFP number was barely high enough to keep up with population increases. Not much to get excited about.

The rallies in Allianz have shown a steady rise and are not looking overly extreme but I am a contrarian by nature and would always be willing to side with a reversal rather than a breakout given the expensive levels. PUTS at current levels have excellent risk to reward ratios so on a purely technical basis, I see nothing wrong with this trade idea.

The FTSE is a sell anywhere into the 5880 area with lower highs and a downward consolidation expected into the end of this year. Market optimism is showing sharp reversals and an extreme lack of follow through any time short term rallies are seen. This shows that sentiment is weak or at least skeptical and traders are looking to book long positions as soon as they get an opportunity to exit at a profit. Today's activity came within 15 points of my PUT entry level and then fell back so this chance for a bearish position looks to have passed.

In addition to the storm, there is the presidential election which will see US equities rise regardless of which candidate takes office. Shorting insurance company stock is definitely a great idea!