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Originally posted by Michael Hodges. For the whole article click here.
S&P 500 A Stones Throw From All Time Highs
SPXCall/Put = CallEntry = below 1520Expiration = end of the monthThe S&P 500 traded in a tight range last week on very light volume. The move up and out of the previous consolidation range is being tempered by the resistance I described before but also by the impending spending sequester. The sequester is Pandora’s box for politicians with resolution echoing throughout the system. Cut spending and send the economy back into recession or keep spending and grow the national debt to new high levels. No matter what they do the markets will react. In the short term it is all just speculation, the facts that we have show an economy in stabilization and recovery. Long term indicators on the charts of weekly closing bars are bullish. The sideways action of the last two weeks has done nothing to turn me bearish and a lot to help the S&P relieve overbought conditions. Adding to this bullishness is positive comments from the Bundesbank about Germany and statements from Japan’s minister of finance. I am trading calls on the S&P 500 with an entry below 1520 and end of the month expiration.
Euro Still Declining Against The Dollar
Eur/USDCall/Put = PutEntry = above 1.3350Expiration = end of the weekThe Euro began a correction versus the dollar last week and looks good to continue it. The pair retreated from a 12 month high on the back of negative comments from Mario Draghi concerning risks to the EU economy. Even though Germany is expected to improve growth this quarter the EU as a whole is not. There are still some risks ahead and impending elections in Italy are only one of them. I am trading puts with an end of the week expiration and a target entry above 1.3350.
Nikkei Targeted By Japans Minister Of Finance
Nikkei 225Call/Put = CallEntry = below 11,500Expiration = end of the monthJapans finance minister stated over the weekend that Japan was targeting stock prices as well as yen value in its approach to fiscal stimulus. The target for the Nikkei is 13,000, fully 1500 points higher than it is now. With the BOJ’s currency devaluation unfettered by the G-7 I see this target being reached in short order. I am trading calls on the Nikkei with an entry below 11,500 and end of the month expiration.