Euro versus the Dollar

Last week we have seen the Euro weakening against the dollar after a long time. Considering the many developments with regard to European matters the Euro may stay this way for some time. The bailout that is set to take place in Europe may cause the dollar to rise against the Euro. Thus, we can hope for better investments in the fields of commodities and equities in general.

There are more things affecting the dollar as we have seen throughout last week. Fossil fuels, metals, crude oil prices, alternative energy as well as geopolitics are on the brink of change and this may affect the dollar positively in some areas.
The debt plagued Greece is hoping for a rather substantial bailout from the Europe and is still in the same position this week. In addition, the same problem seems to be stalking Spain and Portugal as well and consequently the Euro may stay down and the dollar regain in strength after an eight month low.

With the dollar on the rise we can, as usual hope for oil and all other commodities to decline in their prices. This state of affairs translated into a downward trend in the commodity markets and even the jobless rate in the US improving to register below the 10% mark on Friday did nothing to pull back the downward trend as far as commodities were concerned.
Asian analysts are concerned with another development that may have widely felt global repercussions for the energy market and any firm that employs a commodity broker. China has been purchasing more crude oil than their present requirements demand. According to analysts, this may be to facilitate the export of more refined products from China which is going to impact heavily the entire global market.
The only safe haven from fluctuations against the dollar was the gold market. But, last week we saw the gold prices drop sharply by more than 4% and by last Friday the gold prices came down to $1,050 and ounce. Dollars in cash form seems to have taken over from gold as the new safe haven for many an investor in the financial markets.

On the 6th of January crude oil hit the highest for the previous 15 months at $83 a barrel. This of course, changed and today the price of a barrel is just higher than $71. There are fears that this may go below $65 in the coming weeks. This is going to be difficult to recover from with the European debt recovery measures are put in place. Austerity seems to be the name of the game as Europe is battling with recovering from the debt process as we see it today.
Silver and gold still dominates the precious metal market. China has been increasing the demand for physical gold due to the Chinese New Year where gold is now considered to be the favored choice for gifts.
Taken on a global scale the debt crisis will be the determining factor when it comes to the direction of both silver and gold markets. The markets may still be choppy for some time to come. Meanwhile, the European Union’s actions to firm up the banking and equity markets may lift up the Euro against the Dollar.

The Financial Markets such as the Dow and Nasdaq lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. The only good news is that fact the the SEC allowed short selling to re-enter the market for much needed liquidity.

Several stock and commodity broker don't understand why the SEC just didn't halt trading for the companies that they were affraid would be wrecked. Keeping the billions of dollars of manged money has been the main reason for this panic exiting by mainstreet out of the market.

Going forward into next week investors can expect a much less volatile retreat in the market, and even rallies.

When the short sellers exit the market they have to buy causing short term spikes and rallies similar to what was seen before this major crash.

Commodity Prices have been retreating as speculators sold and shorted the market due to less demand world wide.

Oil has retreated with gold on the rise. gold historically goes higher this time of year though with the up coming indian wedding season as well as the restructuring of fund managers portfoilios before years end.

Short Selling Returns!

The return of Shot Selling is a Necessary Action In Trading in all Market Sectors

The ban of short selling limits market liquidity! If you don't allow shot selling, your not allowing the billions of dollars a day from the manged and hedge fund sector that makes up a huge percentage of volume. Short selling is not a long term position hold, and when exiting the market will cause much need spikes and rallies much needed in this free fall. If you leave the direction of the market to individual buyers, your letting everyone down!

With Equities, the share price declines coincided with the lifting of a ban on traders who aim to profit from share price declines. The ban had prevented short selling on nearly 1,000 companies, including financial firms and industrial groups such as GM. The ban was lifted by the US Securities and Exchange Commission late on Wednesday night.

While the ban may have created an initial short squeeze that buttressed financial stocks, traders say hedge funds were then forced to bring down their corresponding long positions in other financial stocks, which created new selling pressure.Weather your a stock or commodity broker today is a good day!

Many market participants believe regulators will be forced to quickly bring back measures similar to the so-called “uptick” rule. The rule, which was scrapped last year, allowed short selling only when the last tick in a stock’s price was positive.

Commodity News

Weekly Option Volatility Report

Each week OPTIONMIZER analyzes markets showing opportunities based on volatility. We delve into the volatility analysis of the markets to find trade designs advantageous to options traders. This report provides specific trading strategies to use in select markets based on the OPTIONMIZER volatility analysis.


October 7th, 2008

S&P 500

5 Month Average Implied Volatility = 24.9
Current Estimated Implied Volatility = 37.1


MARKET AND VOLATILITY ANALYSIS:
Since the approval of the $700 Billion financial rescue plan by a vote of 263-171, the market has done anything but react favorable. The stock market headed lower to start the week as the potential global slowdown sends investors packing. Bailout aside, at home the evidence of deepening credit concerns and employment meltdown is mounting. With the banking situation the way it is and concerns growing among investors that there could be more to fail, the Fed could look to reduce interest rates shortly. Credit issues are a worldwide problem at this point and until it has been addressed the market does not look to have much potential. As previous reports have indicated the volatility in the S&P has been high but continued to increase. This still seems to be the case. Continue to buy premium to take advantage of the even still increasing volatility that is expected to come.

RECOMMENDATION:
Buy short term puts. If these are too expensive implement bear put spreads put on by a qualified commodity broker to help offset the cost. If the market continues to sell off be prepared to scale out of positions.

SOYBEANS

5 Month Average Implied Volatility = 42.5
Current Estimated Implied Volatility = 47.6


MARKET AND VOLATILITY ANALYSIS:
Beans are continuing to be harvested in the south as well as Australia. Right now the quality of the soybeans continues to remain an issue. Like most of the commodities soybeans have experienced recent sell off. It appears at this point there is profit taking helping the market continue its move down. The fundamental issues regarding this market seem to be in the shadows at this point. However, China is king right now and they could influence the market based on what direction they go. The volatility in soybeans is high. With the implied volatility above the statistical, premium collection is the proper play. The implied volatility is up 12% from the 5 month average.

RECOMMENDATION:
Sell butterfly call spreads as well as call spreads.

SUGAR

5 Month Average Implied Volatility = 38.8
Current Estimated Implied Volatility = 44.3


MARKET AND VOLATILITY ANALYSIS:
Sugar has had a substantial sell off over the past week. However, that was stalled today thanks to India deciding to halt exportation due to the low pricing. This caused Asia and Africa to find replacement shipments. The fundamentals in this market seem to be fine, the problem is the strength in the US dollar. The volatility is high right now and it appears that may continue. The sugar market has potential to the downside. The implied volatility is lower than the statistical. In this environment buying premium is recommended. This is due to the expectation of volatility continuing to increase.

RECOMMENDATION:
Buy intermediate term puts (March) or if they are too expensive look to purchase bear put spreads for the same time frame.

HEATING OIL

5 Month Average Implied Volatility = 45.9
Current Estimated Implied Volatility = 53.1


MARKET AND VOLATILITY ANALYSIS:
Heading into the cold months heating oil is a typically a seasonal buy. Heating oil recently saw its first increase in 5 days. With the expectation that heating costs should increase as much as 25% this year the unknown is the weather. A cold winter could cause increased volatility to the upside. It is clearly shown by the chart below that both the statistical and implied volatility is very high. This jump came after the statistical crossed through the implied in the beginning of September. With the volatility so high and the expectation of prices increasing, look to sell high priced premium options that lose value on bullish moves.

RECOMMENDATION:
Collect premium by selling put spreads.

Why Should We Bail E’m Out?

Why a financial firm chooses to expose their operating capital to junk loans is going to be a historic question. But a bigger one will be why our nation decided to support the mistake of these overpaid CEO’s and why we threw cash at them.

Throwing money at the failed firms won’t help Wall Street; Wall Street is made up of nothing more than human nature and speculation. If Wall Street thinks they will make more money going short than long, they’re going short!

The fact is, if this economy wants to rebuild, it has to rebuild fundamentally by itself. It has to flush out all that was wrong and bad and re-build the right way. Only then will a Financial Firm or Bank be a true reflection of itself allowing it to grow healthy and naturally. And guess what, that’s going to happen anyway, it’s just being delayed by temporary news hype and a touchy feely administration via evening news feed.

Any financial advisor that doesn’t have a failed Wall Street insurance to protect your portfolio should be banned by the SEC. Bear Market Funds, SPDR exchange traded funds or Put options on the Stock Indexes from a Futures or Commodity Broker are all ways your adviser can buy insurance for your retirement, rather than saying “sorry, or oh well” when the market crashes. It’s called a “Delta Neutral” position.

As far as the travesty of the crash, it happens with every generation and with every generation it will work itself out, and re-build.

American Dollar, Can it come back, why not?

Futures brokers increased bets last week that the euro will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain in the dollar.

This is a testament as to who is running the show, the FUNDS! No problem as long as you get on the same side. Ok, so fundamentals do play a big part in this market. Actually the funds are willing to exit any and all positions based on world event news, if they figures out the energy markets though, it's only a matter of time before they control the dollar. Traders and commodity brokers alike are having to use technical analysis to follow these invisible market movers.

Oil up again!

The oil markets are now showing signs of mass long buying positions by the commodity index funds, again!
Over the counter swaps are a great way for a behemoth sized funds to run the market in one direction from behind the curtain. The fundamental news about Russia is an excuse used by media writers who wonder why the market decided to go up five dollars today, and not at the beginning of the conflict.
This is precisely why we need to stick to the technical charts in this controlled market. The parabolic overlay on top of the daily chart will give a commodity broker or a trader an even playing field with the manipulators.
I’m not a hater because of high gas prices. Compared to GDP, gas hasn’t been this affordable in years. I and my clients will make money whether the market goes up or down!