Category Archives: Analysis

Labor Markets Lead U.S. Indexes

Binary Market Analysis For February 1st 2013

This rally is still on and it’s being lead by labor. Over the last half of 2012 labor market improvements were the major driver of the U.S. equities markets. The improving scene, as shown by a drop in unemployment between July 2012 and November 2012, gave rise to hopes the consumer was back and that corporate earnings would increase. Many pundits speculated that the third quarter of 2012 was an earnings trough for U.S. corporations and so far the signs are pointing to yes. More than 60% of the 500 companies that make up the S&P 500 Index have surprised analyst by beating EPS estimates in the fourth quarter of 2012. They have increases revenues by 3.5% and earnings by an average 4.8%. Today’s releases of non-farm payrolls data and January unemployment rate were well within expectations and reassured the markets that the underlying fundamentals of the economy haven’t changed.

Non-farm payrolls number were a little confusing. There were some major revisions to November and December, mostly due to annual readjustment of the benchmark numbers, that make the fourth quarter jobs market look a lot better than it did before. The problem is that these figures are subject to wild revisions and since the gains also occurred during a readjustment period there is even more reason to doubt their importance. Looking back over the last year I can that there was a similar spike in jobs creation last winter and that it was bigger than the one we have now. What we should be looking at is the recent rise in unemployment and the signs that it could continue to rise in the next month or two. Many economist expected the unemployment rate to remain steady or even drop, the rate in January actually gained. This is the second month of unexpected gains in the unemployment rate.

This is why. First, there has been no real change in the number of jobs being created in the U.S. The figures are wildly volatile but have remained in a range for over a year. Sometimes we get new jobs and sometimes we lose them; this is probably due to seasonality changes in retail, services and other sectors that occur from year to year. Second, the number of Americans that file for first time claims of unemployment has also remained stable. Over the last year the rate has remained in the range of 350,000-400,000, not counting one dip below and one peak above. This range represents some expansion in the labor market but just barely. And this is taking into considering that the participation rate has remained steady over the last three months. The participation rate is also only down 0.1% from last January and is a sign of a stable labor force. So, If the total number of Americans filing for unemployment is on the rise then the unemployment rate should also rise. Looking at the table below it seems like we can expect the unemployment rate to continue to rise.

My take on unemployment is that it will help the market, and the S&P 500, to rise in the nearer terms. Longer term there is reason to doubt the improvements and suspect a rise in unemployment could be on the way.

What this means for U.S. and world markets? Since the labor market is not really improving and we can expect it to remain as is for a while we can also expect the Fed to continue with its $85 billion asset purchase programs. Their target rate of 6.5% unemployment is one that we won’t reach this year. This will be good for international currencies like the Euro and the Yen. Both of these currencies have broken above resistance and are moving up toward there next targets. Either pair looks good for monthly and weekly call options on intra-day or day-to-day pullbacks. As for the major U.S. and world indexes, I think labor will provide significant resistance to equities market longer term.

Eur/USD Binary Option Analysis

S&P 500 Binary Analysis 2/1/2013

The S&P made a nice move up this morning. The index crossed over to a new intr-day five year high and the Dow crossed the 14,000. Short term the index looks ready to continue its push to retest the all time highs around 1565. There may be some more consolidation around the current level but it looks good for monthly calls. When the index breaks above the 1510 level I will look for potential entries for weekly calls.

The jobs data is OK, basically unchanged,and fiscal policy is not expected to change in the short term. The next hurdles for the markets to overcome is the dismal future guidance we are getting from corporations this earnings season. Corporate expectations are for tough times ahead, this could be a sign of poor first quarter earnings. There is also the whole debt ceiling and sequester issue to consider. Both of those could be a cap to future price gains but are also still weeks, if not months, away. These political events could have a lot of impact on labor trends as well. All three issues could coincide with the S&P 500 retesting all time highs. This is a very key resistance point and one that will bear close watching.

The long term trend is still up. The trend is weakening and faces a lot of resistance ahead. We need to see a marked improvement in long term labor trends. We need to see a resolution to the spending sequester. We need to see business outlook improve. Until these things happen I think the S&P will be halted at or just above the all-time highs. Until then trade with care.

Binary Market Analysis For S&P 500

This week is a tricky one for binary options traders and the S&P 500. There is a lot of data and potentially market moving events this week. The index has also been trending up for four weeks, ever since the beginning of the year. It is up nearly 3% YTD, trading right around the 1500 level and has been making new 5 year highs.

I don’t think that 1500 will provide much technical resistance but it is a round number and no mere coincidence.The earnings season is still in full swing and the economic calendar is loaded. There are more than 3 dozen economic releases and over 300 corporate earnings releases due this week. And an FOMC meeting/interest rate announcement. I don’t expect a rate change this week but I am quite sure that the statement and what they say about QE will be very important. On the data front we get a full run of housing data, an in depth look at the jobs market and the first estimates of 4th quarter GDP.

Economic Calander

Jobs have been the focus of the FOMC and the market for quite some time. The unemployment rate is still high and until it comes down the Fed’s target of 6% we can expect continued asset purchases and QE. The labor markets have been showing some improvement lately and that is what I expect to see this week as well. It is the strength of improvement and projected timeline for more improvement that will influence traders. This week we get the regular weekly reports of unemployment claims, Challenger job cuts, ADP Employment figures, US Non Farm Payrolls and the January unemployment rate. Not to mention car sales, sentiment readings, ISM and consumer confidence.

S&P 500 Daily Analysis 1-28-2013

The primary trend and the short term trend are both up with no signs of reversal. Both trends are showing weakening technicals and the short term is overbought. At this level, and with the full week of data ahead, the three C’s come to mind; consolidation, continuation and correction. This is a great place for traders and investors to take some money off the table and a great place for the index to take a breather. This could come in the form of any of those three C’s. Since I am not expecting much upside this week, at least early on, I am switching to charts of hourly closings to look for put trades with end of day and end of week expirations. The best platform I use for this is Anyoption.com.

S&P 500 Analysis For January 28, 2013

The index is encountering near term resistance just over the 1500 level. I think this will be the cap until after the FOMC at the earliest. After the rate decision announcement(which comes Wednesday at 2:15) there could be some volatility going into the end of the week. The technicals on the hourly chart are also showing weakness and help support my idea of playing puts this week. I will look to the 1500 level for confirmations and project downside targets of 1490 and 1480 on an intra-week basis. I am still bullish long term and am looking for a retest of the all time S&P 500 highs.

Binary Market Analysis For The USD/CHF And EUR/CHF

Trade Analysis For Binary Options

The USD/CHF trade is on the way up. Technically speaking and for the purposes of this article of course. The charts below show the currency pair has recently made a nice consolidation bottom and reversed course. The stabilizing world economy, most especially the Eurozone, and fix to the “Fiscal Cliff” (ominous music plays in the back ground) have investors leaving the shelter Swiss Franc in favor of US dollars and Euros. The franc was a popular safe haven for investors fleeing the dollar and the euro during the world financial crisis. This inflow is what caused the franc to strengthen following the market crash in 2008. In fact, the franc was so strong at one point the Swiss central bank announced “unlimited” purchasing of foreign currencies in order to keep the franc from strengthening beyond Euro 1.20. Ever since then the franc has been fairly stable versus the euro and the dollar. The turning tide of the world economy is reversing that inflow. As the financial crisis wane and world GDP picks up so will the major world currencies. Further weakening the franc is the possibility of negative rates at Swiss banks.

The road ahead is not completely clear for the Swiss franc. There is still lingering fear in the Eurozone and IMF predictions for world GDP growth hinge on recovery in that region. Mario Draghi has said time and time again that the Eurozone will return to growth in late 2013, we’ll just have to wait and see. Until then I see the franc continuing it slide. Short term the USD/CHF and the EUR/CHF are both looking very bullish. Long term is still cloudy and faces resistance.

The short term outlook and the chart pattern are good news for binary options traders. Trading off the daily charts we can assume that both the EURO and the Dollar will strengthen against the Franc. Calls could be played off the long term supports and break outs above $0.93750 and Euro 1.2500 with weekly or monthly positions. There is also some opportunity for hourly and daily calls but both charts are in a consolidation area and volatile at this time. Any ultra short term trading should be taken with extreme caution.

My upside targets on the USD/CHF are $0.93750 and $0.9500 on a break above the first target.

The EUR/CHF is bouncing off a long term support line and making a consolidation. The MACD and Stochastic are both strong and indicating a continuation of the new up trend. My upside targets for this pair are Euro 1.2600 and Euro 1.2800 on a breakout above the first target.