StartOptions.com Market Weekly Outlook – January 25-29

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Oil Rises Above $79 on Wall Street Gains

Oil prices rose more than 1 percent on Tuesday as gains in the U.S. stock market boosted prices, outweighing earlier pressure from mild weather and the stronger greenback.

U.S. light, sweet crude [CLC1  78.93 0.93 (+1.19%)] rose $1.02 to settle at $79.02 a barrel.

The New York Mercantile Exchange combined prices for Monday and Tuesday into a single trading session because of the Martin Luther King Day holiday.

London Brent crude [LCOC1  77.69    0.59  (+0.77%)] was also higher.

“I do think the S&P 500 is the market’s excuse for price recovery. Whether that establishes that the S&P trumps the stronger dollar and the direct fundamentals remains to be seen,” said Tim Evans, energy analyst at Citi Futures Perspective in New York.

Wall Street Tuesday boosted crude prices as investors bet that a Massachusetts Senate race could derail President Obama’s healthcare reform plan.

Opinion polls showed that Massachusetts voters may replace the late Senator Edward Kennedy with a Republican, taking away the Democrats’ 60-vote supermajority in the U.S. Senate.

The S&P Healthcare Index climbed 2.1 percent on Tuesday, with Humana [HUM  51.40    2.89  (+5.96%)] and pharmaceutical company shares leading gains.

Fundamentals Still Weigh

However, high oil inventories and weaker demand due to mild winter weather were still a factor for oil prices, analysts said.

U.S. heating fuel demand is expected to be well below normal this week, according to the National Weather Service.

The Organization of the Petroleum Exporting Countries (OPEC) said Tuesday that oil inventories are high enough to absorb any increase in winter fuel demand.

The group also cut its forecast for demand for its crude by 20,000 barrels per day to 28.59 million bpd in its monthly report, while leaving its forecast for world oil demand growth unchanged at 820,000 bpd.

Futures and Pre-Market

A stronger dollar may also add some pressure to oil prices, with the euro falling to a four-week low against the dollar.

A rise in the value of the dollar often discourages investor interest in dollar-denominated commodities such as oil.

Japan Airlines’ bankruptcy filing Tuesday may also have some impact on oil prices, some analysts said. The company said it would cut more than 15,000 jobs and unprofitable routes.

Week Ahead: Earnings Will Call the Tune for Stocks

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Banks Must Repay Taxpayers $90 Billion for Bailout: Obama

Declaring “We want our money back,” President Barack Obama wants to slap a tax on banks to recoup the money that the American public spent on bailing out large financial institutions on the brink of collapse.
The president said Thursday his goal is not to punish banks, but rather to prevent them from a behavior of excess, including new employee bonuses he called “obscene.” In brief comments at the White House, Obama took a deeply populist tone.

He said: “My commitment is to the taxpayer.” The president said big banks had shown irresponsibility, engaged in reckless risk for short-term profits, and had gotten themselves into a crisis of their own making.

Some firms would have to pay the fee even though many did not accept any taxpayer assistance.

Obama proposed that major financial firms pay the fee—expected to total $90 billion over 10 years—to protect taxpayers from up to $117 billion in losses on a bank bailout that has spurred fury at Wall Street excess.

Obama’s action comes amid mounting public anger over multi-million dollar bank bonuses while ordinary Americans struggle in the face of 10 percent unemployment.

“The fee that is put forward here is in many ways a minimum — a minimum of what is owed back for the rather significant costs that are borne in many aspects by the taxpayers,” an administration official told reporters.

The levy will recoup losses from a $700 billion taxpayer rescue of U.S. banks called the Troubled Asset Relief Program, or TARP, conceived in 2008 by Obama’s predecessor, George W. Bush, at the height of the global financial panic.

Forged after the collapse of U.S. investment bank Lehman Brothers and multi-billion dollar rescue of insurance giant American International Group

ARP helped stem the crisis by injecting public capital into the biggest U.S. banks and convincing investors no others would be allowed to fail.

The action, together with massive monetary and fiscal policy stimulus from the government and Federal Reserve, was unable to deflect the country’s worst recession since the Great Depression, which has pushed unemployment to a 26-year high.

However, that did not obstruct bumper profits on Wall Street as stock markets rebounded sharply in 2009 from crisis-lows.

This has helped many of the banks repay their TARP injections, freeing them of government rules on compensation and allowing them to now pay out major staff bonuses.

Banks that have already repaid TARP capital will not be spared the fee, and nor will firms that got no TARP money to start with, but nevertheless benefited from the stability it brought to the U.S. economy, the official said.

Full details of the fee proposal will not be laid out until Obama delivers his budget for fiscal 2011 in early February, and will then be subject to shaping by Congress. The plan will include a levy of 15 basis points, or 0.15 percentage point, on the balance sheets of big firms with assets of more than $50 billion.

The Obama administration expects to raise $90 billion over the first 10 years, and thinks this will ultimately cover all losses from TARP, although at the moment these losses are being projected at $117 billion.

“The banks that are in question were significantly responsible for an enormous degree of the reckless risk-taking that was borne throughout the entire economy,” the official said.

AIG will be subject to the fee. But mortgage lenders Fannie Mae and Freddie Mac, which are under government conservatorship, will be excluded, as will U.S. automakers who got bailout money.

Public rage at bankers, whom Obama chided in December for their “fat cat bonuses,” has taken on a deeper political dimension as Democrats who control Congress weigh sweeping financial regulatory reforms in the face of stiff industry opposition.

Wall Street chiefs were grilled Wednesday at the opening hearing of a special inquiry into the 2008 financial crisis and the resulting taxpayer bailout to save their industry.

The White House said Wednesday that an apology was the least the country expects to hear from the banks.

The heads of Goldman Sach, Morgan Stanley, JPMorgan Chase and Bank of America aced the first public hearing of the Financial Crisis Inquiry Commission.

It will convene throughout the year and is expected to issue a report by Dec. 15.

Stocks Shed Losses as Bank Stocks Gain

Stocks turned slightly positive as investors warmed to bank stocks, a day before the White House will announce its plans to charge the industry fees related to the industry’s bailout and as Congress probes the financial system’s collapse.

Major indexes faced pressure most of the morning after energy prices fell on an inventory surge and concerns persisted over global growth. But the mood turned a bit positive as Wells Fargo , Bank of America and others headed higher. BofA earlier was the biggest drag on the Dow.

Energy shares also fell after a report showed a larger than expected surge in inventories.

Oil prices dropped again, falling below $80 a barrel for the first time in 10 days even as the dollar continued to fade.

Chevron was the biggest loser on the Dow 30, which lost an early pop as the market sought to rebound from a losing day Tuesday.

Resource companies also fell, with Southern Copper dropping more than 2.5 percent.

Kraft Foods stoked some investor enthusiasm as it raised its outlook for the second time in two months. Investors even scooped up shares of Alcoa , which led the market lower yesterday after issuing disappointing earnings.

The market fell Tuesday on concerns over earnings and whether monetary tightening in China would stall the global economic recovery.

The China worries seemed to abate somewhat but remained a lingering concern.

“We don’t expect the effects of the current tinkering to be overly disruptive or derail the recovery trend,” Tinconderoga Securities analyst John Stoltzfus wrote in a morning research note that acknowledged a “steep selloff” remains possible. “Likely a look in the rearview mirror sometime down the road will tell us that China’s actions … were sensible and ultimately prudent.”

Technology continued to be a sore spot for the market, though, with chipmakers particularly weak and the Nasdaq lagging its counterparts. shares dropped for the second consecutive day as investors begin to take profits from an aggressive two-month rally in the group.

Google shares fell on news that it may pull out of China because of cyber attacks. Chinese search engine Baidu surged.

AstraZeneca was among the market’s big movers, rising after Credit Suisse upgraded the pharma leader to “neutral” from “underperform.”

Another snapshot of the economy comes at 2 pm New York time, when the Federal Reserve releases its Beige Book, the region by region assessment of economic conditions.

At the same time, the Treasury is out with the December budget statement, expected to show a deficit of $91 billion for the month, compared with a shortfall of $51.8 billion in December of 2008.

Sony gained as it postpones the launch of videogame Gran Turismo 5, citing production issues for the latest in that hot-selling videogame line.

Binary Options Game Plan-USD/CHF Breakout 09/12/09

As you can see in the graph below, the USD/CHF u broke out to a new month high.
It seems like a great scenario for buying USD/CHF binary option call or entering a long spot position.

Binary Options Game Plan for USD/CAD 12/08/09

We have a nice bullish momentum of the USD/CAD with a run from 1.0493 to 1.06670 in just 11 hours of trading. After the ascending triangle breakout at the 1.06460 level was followed by an immediate retreat,
it might indicate a false breakout, and a sharp comeback to the 1.06177 level, Buy a USD/CAD Binary PUT Option in a case of a penetration of the 1.06460.

StartOptions.com dealing room intraday review of Forex Options opportunities

Euro Rises as ECB Takes Steps to Scale Back Emergency Measures

Dec. 3 (Bloomberg) — The euro rose against the dollar and posted its biggest gain in a month versus the yen as European Central Bank President Jean-Claude Trichet announced the first steps toward scaling back emergency stimulus lending.

The euro climbed to near its strongest level in 16 months versus the dollar after Trichet told reporters in Frankfurt the need for such stimulus measures has diminished. It pared some of the gains after he said the recovery will be “uneven.” The yen slipped against higher-yielding currencies as the MSCI World Index of stocks gained for a fourth consecutive day.

“The fact is that stimulus is being withdrawn and growth is a little firmer than expectations,” said Jeremy Stretch, senior currency strategist at Rabobank International in London. “That’s keeping the euro well supported.”

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Gold may rise after climbing to a record in New York for a third day as investors sought protection from a weakening dollar.

Dec. 3 (Bloomberg) — Gold may rise after climbing to a record in New York for a third day as investors sought protection from a weakening dollar.

The dollar fell as much as 0.6 percent against the euro on speculation the European Central Bank will announce plans to scale back emergency lending after keeping its main interest rate at a record low. Gold futures, which usually move inversely to the greenback, have added 38 percent this year as the U.S. Dollar Index has lost 8.4 percent, sparking inflation concern.

“Momentum is very positive for gold,” Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich, said today by phone. “Weakness in the dollar is expected to go on until the end of the year. Gold could have a strong year-end rally.”

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