By Gareth Soloway on June 21st, 2010 12:16pm Eastern Time
The markets gapped higher today on the back of a report from China that the Yuan will be allowed to slowly float higher against the U.S. Dollar. Asian and European markets surged on this news and the futures going into the open were at their overnight highs. The SPDR S&P 500 ETF (NYSE:SPY) gapped up and hit $113.20 in the opening minutes of trading. At that point, I signaled I was shorting the markets by utilizing the ProShares UltraShort S&P500 (NYSE:SDS). I put out my buy alert to the members of the Research Center on the Hot Charts and Alerts at $31.40. The low was nailed within $0.02.
Why did I look to short this gap higher? There are a few reasons. Let me discuss. First, the markets are up from $104.50 on the SPY in the last 10 trading days. This tells me that short term, the market is extended and there is less risk of the markets going substantially higher than lower. Therefore, positioning oneself on the short side is a decent short term risk reward play. Next, many thought Friday the markets were topping out because of options expiration coming to a conclusion. This gap up today, took out a lot of the amateur, retail shorts from Friday, removing the weak hands. The third issue is the Yuan, the Chinese currency and the expected revaluation against the Dollar. While they may let their currency float slightly more, it is only going to be a tiny amount. In the scheme of things it will do very little. Also, it fixes none of the current problems in Europe or the overall global economy. Lastly, if you take a look at key stocks like Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), they both gapped higher today into their 50 moving averages on the daily chart. The methodology dictates that the first hit of the 50 moving average will be a significant wall and a good shorting opportunity.
For these reason, the short at the master level of $113.00 on the SPY was an obvious choice. So far my members and I are solidly in the money, enjoying the pull back in the markets off the highs. I am neither a bull nor a bear, just a swing trader looking to make money on both sides of the market. To get more guidance, education and calls like the SDS, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
By Gareth Soloway on June 21st, 2010 12:58pm Eastern Time
The markets gapped higher today on the back of word from China that they would let the Yuan float slightly higher against the Dollar. While many would think this would cause a massive drop in the Dollar, it did not. As if this news was already factored into the Dollars recent pull back, the Dollar gapped only slightly lower. Just in the last couple hours, the Dollar has started to soar higher, the markets are getting hit to the downside, though still slightly positive. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) made a low of the day at $24.89 around 10:00am ET. Since that point, it is jumped to the highs of the day at $25.00, up $0.06 on the day. The Euro has dumped out sharply with the CurrencyShares Euro Trust (NYSE:FXE) at the lows of the day at $122.89. To get more in depth analysis, guidance, education and swing trade calls, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.comRead more…
By Nicholas Santiago on June 21st, 2010 3:30pm Eastern Time
Today the markets all rallied ahead of the open at the New York Stock Exchange on the possibility of the Chinese allowing the Yuan to appreciate instead of being pegged directly to the U.S. Dollar. While this is certainly a victory for the politicians that were pushing for this many traders including myself could not believe the market was in jubilee mode after that announcement last night. The stock market indexes behaved like it was a cure for cancer. It seems the only people that will benefit from this action will be the Chinese. The Chinese are currently looking to slow down their thriving economy and this should certainly help them do that. However, this does not help the U.S. or the U.S. consumer.
Today the U.S. Dollar Index has traded sharply higher throughout the day while the Euro currency has declined. This morning the Currencyshares Euro Trust (NYSE:FXE) was trading as high as $123.60 and is now trading lower by 0.56 to $122.80. As the Euro goes so goes the market indexes. Obviously when the Euro sells off the dollar will usually gain, and that is the case as the dollar is higher by 0.60 to $85.98. The popular Powershares DB U.S. Dollar Index (NYSE:UUP) is higher by 0.09 to $25.03.
While today's market volume is very light the reversal is brutal. The Powershares QQQ Trust (NYSE:QQQQ) was trading as high as $47.67 just after the open and it is now trading negative on the session at $46.60. That is a huge reversal on the QQQQ's intra-day. The NASDAQ composite was sharply higher earlier this morning and has now reversed lower by 24.00 points. At the time of this writing that is a 55.00 point reversal from the intra-day high to the current low in the NASDAQ Composite.
Reversals of this magnitude could lead to more selling especially after such so called positive news. Make the charts make the money. The news is for the birds once again.
Read more…
U.K. Gets Ready For $40 Billion In Tax Hikes
By ITMS News on June 21st, 2010 8:03am Eastern Time
(MarketWatch) -- The U.K.'s new Chancellor George Osborne will Tuesday lay out plans for billions of pounds of spending cuts and tax increases as he attempts to tread a fine line between narrowing the deficit, while avoiding derailing the recovery.
Read more…
The U.S. Dollar Index remains the most important chart in the markets at this time. When the dollar declines the market indexes inflate. The opposite is true when the U.S. Dollar rallies the stock markets deflate. This week the U.S. Dollar Index dropped sharply by 1.94 to close the week at $85.56. In the currency world a decline of this magnitude is a lot of meat and potatoes. Just notice the two week rally in the major stock indexes coincides with the sharp two week decline in the dollar. The U.S. Dollar Index will have weekly support around the 85.00 area and more around the 83.00 area.
Traders and investors that want to trade the U.S. Dollar index to the long side can use the PowerShares DB US Dollar Index Bullish (NYSE:UUP). For the traders and investors that would like to trade the dollar to the downside or short the currency can use the PowerShares DB US Dollar Index Bearish (NYSE:UDN).
Read more…
By InTheMoneyStocks.com on June 20th, 2010 12:32pm Eastern Time
The S&P 500 Index gained nearly 26.00 points for the week ending Friday June 18, 2010. This move higher took place during a quadruple witching options expiration week. This is when expiration's will take place in stock index futures, stock index options, stock options and single stock futures. Therefore, there is usually a lot going on during this entire week of trading. It is also important to remember that many in the public became extremely bearish in early June and bought a lot of puts on the market. Rarely will the powerful institutional money allow the small retail trader to collect on such an investment; the institutions will usually rip the market in the opposite direction of the popular strike price. As of this time the market indexes are bouncing higher purely due to the U.S. Dollar Index declining. When the dollar dips or declines the stock market indexes rally or inflate. The short term weekly resistance levels on the S&P 500 INDEX,RTH (INDEXSP:.INX) will be around the 1122.00 area and 1140.00 level. Traders and investors can utilize the SPDR S&P 500 ETF (NYSE:SPY) as an alternative means of tracking the S&P Index.
Read more…
CHINA's ANNOUNCEMENT TO INCREASE YUAN FLEXIBILITY would have a negligible market impact (no major change by end of week) if any currency revaluation is no more than 2%. If the revaluation is more than 2% then we could see some upside in commodities, Asian currencies as well as global equities on the rationale that a stronger purchasing power would increase Chinese imports for global trade. Only to the extent that markets worry about the negative impact to Chinese exports would equities sell-off. Some Chinese textile makers are already on the edge of bankruptcy. The other issue is that of the FX band, which if widened from 2.1%, then it could raise the risk of a potential DEPRECIATION of the yuan in the event of falling stocks. One last thing; the MORE important factor is the SUBSEQUENT revaluation of the yuan over the rest of the year and NOT just the initial annnouncement of today or this week. Ashraf is still in South Africa for the World Cup (on holiday).
Read more…
