Analysis for short term option trading!
Trade Recommendations- we are still bullish on the SPY. It is presently resting, but that does not mean that we cannot still move up. Our Thursday should lean toward bullish influence or rest slightly but we are not expecting anything too bearish.
Bollinger Bands— the SPY rested on Friday, but make no mistake, we are still very bullish as it rides the top of the Bollinger Bands. There is a pattern developing that you can see I have high-lighted in the squares. We are moving up and then resting and then moving up again. This has been he pattern and we will continue to watch for change.
RSI- the can be seen as very strong here because the RSI is slowly and consistently moving up and that shows strength. This supports what we see in the Bollinger Bands. We are very strong.
On Balanced Volume- the trend and is supportive of the RSI and Bollinger Bands. We are very bullish as volume & price continues to increase.
Outside Market Influences-
Look at Europe: Before the summit, German Chancellor Angela Merkel went before her parliament and, in an impassioned speech, basically declared that unless the parliament approved the expansion and leverage of the EFSF the European Union would collapse, along with the decades-long peace that has prevailed.
Words from Martin Wolf for the new ECU Italian President—“The European Central Bank alone has the power to quell the eurozone crisis. You must choose between two paths: the orthodox one leads towards failure; the unorthodox one should lead towards success.” Martin Wolf is by no means alone in his call for the ECB to aggressively shore up the European sovereigns and bank markets. There is a very long line of establishment types throughout Europe who are doing so, though there is a notable lack of German figures.
We should note that the summit decided that the Greeks should also privatize another €15 billion in national assets, on top of the €50 billion they are already supposed to have done, but on which no progress has been made. All the while finding €17.5 billion to fix the hole in their pension funds, which was already so deep that no daylight could seep in.
The Econintersect economic forecast for October 2011 predicts very weak growth. The forecast for November will be released Monday. A more positive note is that there has been a mediocre improvement in the data over the last two months.
ECRI has called a recession. Their data looks ahead 6 months and the bottom line for them is that a recession is a certainty. The size and depth is unknown. Although Econintersect’s data is not yet recessionary (one month look-ahead) – we take this recession call seriously. This week the actual level of ECRI’s WLI index was less bad but still indicating the economy six months from today will be worse.