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Originaly posted by Michael Hodges.

S&P Drops Back To Trend

Call/Put = Call
Entry = Below $1680
Expiration = One Month

The long term trend in the S&P is still up. The weakness in futures trading Sunday night is a little worrisome but only brings the index down to it’s trend line and support zone. I think the drop in early futures trading was more a lack of buying than an increase in selling. On the daily charts bearish momentum is weak and stochastic is reaching oversold levels at this time. Both of these indicators are currently coincident with a trending market reaching support.

The shut down is a concern but likely not to affect the markets long term unless we actually do enter default (highly unlikely). The economic trends and earnings are what is going to carry the markets are so far there is no sign of impending market reversal. However, the shut down/budget battle will probably cause some near term volatility so I am looking to trade longer term one month positions. I am bullish on the SPX long term and trading calls with a one month expiry and a target entry below $1680.

Don’t Count Germany Out

Call/Put = Call
Entry = Below 8,500
Expiration = One Month

The DAX got hit this past weekend as well. Monday saw the German index down by nearly 1% but it is also still above support and the long term trend. Near term noise has brought this index down to a potentially great entry point. Long term economic trends are positive here as well, with improvements in the U.S., China and Japan all helping to support growth. In order to avoid near term fluctuation I am targeting a one month expiry here as well. I am entering calls with a target entry below 8,500 and one month until expiration.

Spinning Gold

Call/Put = Put
Entry = Above $1315
Expiration = One Month

Gold is hovering just above the $1300 level and forming a series of spinning tops. At this level the metal is above a support and below a resistance, still trending down. I would expect gold, in more ordinary times, to be up much more than it is with how weak the dollar is. This is only one of the red flags that have popped up on my radar. Once the shut down is over and we can move past the budget battle craziness the dollar will probably get a boost and help send gold back under $1300. I am trading a put on Gold with a target entry above $1315 and one month until expiration.