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Options Pro Weekly Report - Al Abaroa

Options Pro EssentialsU.S. Economy: Trick or Treat! While I’m sure that it is a term most will be hearing this weekend at their door, I’m thinking more along the lines of next week’s reports. What an action packed way to start the month of November! Mid-term elections will more than likely dominate headlines early in the week, but let’s not forget to keep a watchful eye on the ISM Mfg Index being released Monday. The consensus read is for 54.5. This is above the all important 50 level, but off from last month’s 56.7 read. The relevance here is that early in the year it was manufacturing that seemed to be boosting the economy and with last month’s read on new orders dropping to only 51.1, this trend may soon be seeing its end. Once the market makes it through Mid-term elections and whatever “trick or treat” the FOMC surprises us with Wednesday afternoon, attention will quickly focus to the Employment numbers being released on Friday morning. In my opinion, the host of fundamental reports this week will likely make for some volatile price action and may create some short term opportunities. However, be mindful that there is risk of loss in trading, so remember to adhere to individual risk management discipline.

Turning attention to the charts, the December ES futures contract reached a high of 1193 this past week. This is roughly 1.50 points shy of the 200 week moving average (WMA), resting just above at 1194.61. Loyal Readers will know that I have been watching the 20 and 50 WMA’s recent bearish crossover. Despite the recent rallies, the bearish trend remains intact, but this indicator is being monitored very carefully as a bullish crossover may be indicative of a larger move higher. The bulls are facing the challenge of surpassing the 200 WMA hurdle, which is being reinforced by the 1.236 Fibonacci extension at 1191.50. Zooming in on the daily chart, the 20 day moving average (DMA) has served as support on the rise since August. I would urge caution on closes below the 20 DMA as it may mark a near term top.

Here are some of the reports to watch for this week: Monday brings, Personal Income and Outlays, ISM Mfg Index, Construction Spending; Tuesday, FOMC Meeting Begins, Motor Vehicle Sales, ISC-Goldman Store Sales, Redbook; Wednesday, MBA Purchase Applications, Challenger Job-Cut Report, ADP Employment Report, Factory Orders, ISM Non-MFG Index, FOMC Announcement; Thursday, Monster Employment Index, Jobless Claims, Productivity and Costs; Friday, Employment Situation, Consumer Credit.

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