Looking at the Tuesday session, there are a couple things that we will be paying attention to. The first number coming out is the UK CPI year-over-year number, which could move the British pound and the FTSE. That being the case, the market breaking back above 6400 on a daily close would be enough to have a start buying calls in the FTSE again, as it would reenter the previous consolidation area. However, I believe that more than likely we will not see that, and the market could very easily drop to the 6000 level over the next several sessions. Of course, if we get a very negative CPI number, that could send the FTSE lower fairly quickly. In that sense, we would be buyers of puts.
Looking at the Calendar, the German ZEW numbers come out, and that of course can have an effect on the EUR/USD. The pair continues to struggle, and during the session on Monday we originally rallied, but failed at the 1.207 level. With that, the market should continue to be a put buying opportunity every time we rally.
Gold markets continue to look like they are struggling with the $1240 level, and it is not until we get above there that we would be comfortable buying calls, and therefore we feel that every time this market rallies, is asking us to buy puts. If we do see continued resistance, and more importantly USD strength, it’s very likely that this market will continue to drop and head below the $1200 level longer-term.
The S&P 500 looks as if it’s trying to find some type of support during the session on Monday, and a break above the top of the range for the Monday trading session would be reason enough to start buying calls because the risk to reward ratio is so strong.