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SP 500 Moving Cautiously – Put Options Recommended -

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Jul, 28th 13:50

US stocks have been moving cautiously today after the Fed decided to hold the interest rate unchanged at the target range of 0.25%-0.5% . The Fed noted that near-term risks to the US economy have diminished. The central bank did not give an accurate schedule for another rate hike, but the prospects of an increase at meetings in September, November and December still seem reasonable, due to the rebound in the job market recently.

The SP500 index lost 0.17% to around 2164.07, 0.58% below the record high reached last Friday. The US dollar index, measuring the strength of the greenback against the basket of major currencies, recovered slightly to 96.58 after tumbling to as low as 96.30 early this morning.

Four out of the index’s 10 main sectors climbed higher, with technology gaining 0.8%. “Consumer-Staples” producers fell 1.4 percent as Coca-Cola tumbled. Apple shares added 6.6%, the largest gain since April 2014, after posting a smaller-than-expected revenue decline as its cheaper iPhone model gained more traction.

In addition to the corporate earnings, Garmin Ltd. also added 11.6%, closing near its highest price in over a year. The company beat analyst estimates while raising its year-end forecast. McDonald’s Corp. lost 1.8 percent, its worst two-day drop since August, after a disappointing earnings report on Tuesday.

Facebook has delighted the market after the advertising business gained in the latest quarter thanks to mobile messages, pushing its earnings well above expectations. The company said that its revenues from advertising, after adjusting for the effects of foreign currencies, had risen by 63% from a year before.

The US GDP, the broadest measure of economic activity and the primary gauge of the economy’s health, will be reported tomorrow. It is anticipated to rise 2.6% in June compared with May’s 1.1%, reflecting the market’s expectation of a stronger US economy, which has supported the US dollar.


Fig. SP500 H4 Technical Chart

SP500 has been moving sideways around the price area of 2164.85 after the decision of the Fed yesterday. RSI is hovering at level 49 and heading down. It is expected to continue falling and push the price down. The –DI has refused to cross the +DI and turned its head up, suggesting an upcoming down-move for the index. It is anticipated that the price will go on with the current trend for the rest of the day and may test the support level of 2150.29.

Trade suggestion

Buy Digital Put Option from 2165.05 to 2150.29 valid until July 28, 2016

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