Date: October 31, 2005 15:00GMT 10EST
Expert: Derek Frey, Head Trader of Odom & Frey Futures & Options
Market reaction to news!
- This week's data and events
- Key support and resistance for major markets
- Derek's insight on the week inreview and the week to come
- Pound Sterling
Who is Derek Frey?
Derek Frey has been a futures trader since 1989 and is Head Trader and partner at Odom & Frey Futures & Options, a firm that specializes in high probability, defined risk option spread trades for the futures markets. Derek is also co-author of O&F News & Views, a weekly newsletter that is published by several publications and over 20 financial websites including FXStreet.com.
Market Reaction to News
As I suspected last week the Stock market did not follow through to the downside and is now trying hard to rally back up above 10,400. We are recommending a short term bull call spread at this time by buying the Nov. Dow 105 call and selling the Nov. Dow 107 call as a spread. There is a very strong seasonal tendency for stocks to rally for about the next four weeks. The trade I suggested above is a great way to be positioned to take advantage of this trend if it develops while keeping risk in check.
Key Support and Resistance for Major Markets
Bonds: Bonds Managed to break down this week after a brief dead cat bounce late last week. I continue to be concerned by the excessive small spec short interest. We are doing our FOMC Bond strangle again for Tuesday’s FOMC meeting. I expect a rather dramatic increase in volatility in Bonds after this Fed. meeting due to all the chatter about this being the “8th inning” again. Derek Frey 10-28-05
Insight on the Week in Review and the Week to Come
With a two year low reported in U.S. consumer confidence along with a 2.1 percent plunge in durable goods orders, eyes will be focused on Friday’s Gross Domestic Product figures. Nascent doubts remain on the strength of the world’s largest economy and the validity of rising interest rates.
The Us Dollar did fail to follow through to the upside this week. This should have given metals boost but was not enough to get them to breakout to new highs. Gold continues to consolidate around the 475 level, while silver is doing the same around the 7.80 level. Copper too is consolidating around the 180 level. Palladium has been the exception as it continues to make new highs. Platinum is trying to follow Palladiums lead but so far has struggled to break out. All of this points to the strong possibility of a continuation of the overall bull trend we are seeing across all metals. Since we have seen such strong consolidations lately it is reasonable to expect that we are only days away from a break out. This Friday’s late dollar rally is likely to fail next week just like last Friday’s dollar rally failed to follow through this week Derek Frey 10-28-05
EUR/USD: The Euro did try to stage a rally this week but was largely held back by the rather stagnant Dollar. I do expect further downside on the Dollar so the Euro should rally this coming week. Wait for a move above 122.00 to get long
USD/CHF: With the Dollar failing to follow through the Swissy also failed to breakout above 130. I do not expect much strength in the dollar this coming week so look for this market to continue to fall.
GBP/USD: The Pound did begin moving towards 180 but fell slightly short. I do see 180 being broken through this coming week.
USD/JPY: I continue to be bullish this market and expect to see a move towards 117 this coming week
AUD/USD: My stop and reverse order at 74.25 so far has held and I do think we should see the beginning of a rally this coming week
USD/CAD: The Canadian broke out mid week only to pull back 300 points in the next four days. I look at this as the final shakeout before a dramatic rally that caries us above 120.00 near term
USD/MXN: The Peso continues to drift sideways this past week. I am bullish this market but not overly bullish. I would prefer the Canadian if I could only be long one currency