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Next Friday is Options Expiry. Looking at the Weekly charts of YM, ES, NQ & TF below, we can see that they closed the week at or just below resistance on higher volume, with Bollinger Bands widening, which suggests an upward continuation. In support of this suggestion, the Dow 30, Dow Transports, Dow Utilities, S&P 500, Nasdaq 100, and Russell 2000 all closed above their support levels that I mentioned in my post on January 10th.
If they break and hold above, they may make a run towards the upper Bollinger Bands on the charts below…each candle represents a one-month Options Expiry period…the current candle will close on January 20th. We'll see if they do break and hold above resistance, and how far they rally…alternatively, price may drop to the mid-Bollinger Band on either timeframe. Inasmuch as it's a short week, we may see daily opening gaps occurring from aggressive overnight trading with market makers running prices further up during market hours in order to reach such lofty targets.
“What do you think about the latest economic report, data coming out of Europe, etc?”
That’s a question I often receive. My typical response, I don’t care. Okay, that may be a bit harsh, but it is true. For the most part I really don’t care about the daily news that flows in and out of the market. I am an options trader. I trade strategies based off probabilities. I create statistical advantages based on my current market assumptions.
We must realize that knowing what is going on in the news and knowing how to make money consistently are two separate things. For successful options investors it’s about your strategy, your logic, your process, it doesn’t matter what you think the market the latest economic report is going to say. I realize it’s a difficult concept for the options newbie to understand.
Further to my post of January 11th, I have my answer…it would appear not. Based on Trade Balance data released today, the trade deficit widened more than forecast…attempts to move higher have progressively failed from the highs in 2009, as shown on the graph below.
If, for the first time in human history, JBTFD fails the bulls today, we could be in for a very interesting week ahead. Breaking 1259.75, where the arrow is pointing, would, I think, be the final nail in the coffin for this pattern (I am not suggesting this could happen today, but perhaps early next week). We shall see.
Below I've put together three charts that had been on a nice upward trend that is finally showing some weakening and a desire to shift directions and move much lower. Granted, we'll need to see some market weakness in the days and weeks ahead, because at the current rate, it's hard for anything to trade lower.