Light at the End of the Tunnel for U.S. Stocks on Friday

Light at the End of the Tunnel for U.S. Stocks on Friday

Currencies

USD

There has been so much strength for the dollar both in the past week and month. In fact, the greenback is headed for the best monthly gain in two years on reports showing that an improving American economy adds to the forecast that the Fed will increase interest rates in the first half of 2015. It is important to take into account that rates are set to be raised in the U.S. much faster than in the Eurozone or in Japan. The dollar has been able to jump to its highest level in 22 months versus the euro prior to the ECB meeting on October 2.

GBP

It was great to see that the pound sterling was able to jump to its highest rate in two years versus the euro during last week’s trading session. The GBP jumped for the second week in a row versus the euro. This came as the Bank of England moves towards raising interest rates. All of this has come amid the slower growth in the Eurozone where stimulus is expanding notably.

EUR

The European single currency was one of the biggest losers during last week’s trading session. Investors simply felt hat they should take their money out of the euro for a number of important reasons. One of these is due to the Eurozone going ahead with some very aggressive stimulus measures. In addition, the growth rate is negative in a number of countries in the region. Therefore, the weakness which we have seen for the EUR is not a surprise. There was weak economic data published from Germany, while manufacturing n the Eurozone slowed last month. Therefore, investors may want to go short on the EUR for another trading week.

Stocks/Indices

There was light at the end of the tunnel when U.S. stocks gained during Friday’s trading session. The thing is that they tumbled last week as a whole. Thursday saw the worst day since July for U.S. equities, but at least the week ended on a positive note with the S&P 500 Index surging the most in five weeks. This came amid corporate earnings topping forecasts. In addition, economic data showed the fastest growth since 2011.

The S&P 500 slumped 1.4 percent during last week’s trading session. The Dow dipped 1 percent last week as a whole.

It is important to take note account that the S&P 500 has dive 2.3 percent since hitting a record high on September 18.

Commodities

Crude Oil

There was positive news for crude oil, as it was able to cap its biggest week of gains in a month. This came on the forecast that stronger U.S. economic growth will increase demand for the energy. Economic data showed that the U.S. economy expanded notably in the second quarter of the year. U.S. GDP grew at a revised 4.6 percent annual rate in the second quarter, up from the previous forecast of 4.2 percent. Traders are hoping for more gains with crude in the coming days.

Gold

Gold dropped notably last week on the news that the U.S. economy expanded at the fastest pace since 2011. With there being more demand for the greenback and riskier assets at the latter part of last week’s session, it is only natural that traders will go short on haven gold. Weekly Put options will be the way to go on Monday.

Wild Card

S&P 500

Traders may want to open weekly Call options in the S&P 500 after the gains it was able to make on Friday.