Week of Oct 1st, S&P500 & Dollar Index

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Stock Index Corner: S&P 500

Fundamental (source: CRB):
Earnings expectations were unchanged in the latest week: Q3
(+14.2%), Q4 (+13.7%), and Q1-2007 (+10.4%), according to
Thomson First Call. Annual earnings expectations are currently at
+14.7% for 2006 and +10.2% for 2007, which would follow 3 consecutive
years of double-digit earnings growth (2005 +13.7%, 2004
+20.2%, 2003 +18.4%, vs 2-decade avg of +7.5%). The S&P 500
forward P/E (based on forward-looking earnings) is currently at
15.36 which is just moderately above the recent 11-year low of
14.27 posted in mid-June and keeps the stock market in a reasonable
valuation light.

FOMC expectations—For the first time in this cycle, the market
has completely erased expectations for any further tightening and is
now only discounting rate cuts going forward. The market is discounting
no chance of a rate cut at the next FOMC meeting on Oct
24, but the market is discounting a 34% chance of a 25 bp rate cut
by Jan-2007 and a 100% chance of a rate cut by June-07. The market
is discounting a 78% chance for a further 25 bp cut by Aug-07.

Technical:
S&P500 has outperformed all major indexes (Nikkei, FTSE, ASX) for the past 2-3 months and made a new 5 yrs high last week. The bullish momentum is strong. However, on daily timeframe, a corrective move is expected in the next few days to reach 1332 support and if broken, potential next support at 1320. Next resistance at 1369 (Dec futures).


S&P500:
Big Picture: (monthly): Bullish
Medium term (weekly): Sideways to Bullish
Short term (daily): Possible move to the down side

Major World Indexes - Weekly MACD Histogram: FTSE, Nikkei, ASX - UP (Bullish)


Commodities Corner: US Dollar Index

Fundamental (source: CRB):
The dollar index temporarily fell but then rallied back on the improved
US economic data seen in the Sep US consumer credit report
and Aug new home sales report. Bullish factors for the dollar
continue to include the rally in the US stock market to a new 5-year
high (which attracts capital to the US), signs of some improvement
in the US economic data from the drop in gasoline prices and mortgage
rates, and the fact that US interest rates remain well above
overseas rates, even though US rates are now pointing downward
while foreign rates are pointing upward. The market is fully expecting
a 25 bp rate hike to 3.25% from the ECB on Oct 5 and a
further 25 bp rate hike to 3.50% in December. Meanwhile, there is
about a 50-50 chance for a BOJ rate hike to 0.50% by year-end.

Technical:
The USD Index has moved sideways for the past five months between 84 and 86.
It may continue to do so in the next few weeks.


Trading ideas : (please apply your profit/ risk management rules in all trades, please note except options writing, all the other trades may last just several days)

Writing Options: US Dollar Index OTM Puts
Futures: Short Dec Cotton
Options: ADBE (long puts), QCOM (long outs)

Week of Sep 24th, Nasdaq and Orange Juice

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Stock Index Corner: Nasdaq 100, the chart above showed that last Thursday hit the Op and 0.618 fib node. There is now a high possibility for the down move in the subsequent weeks if the weakness persist. The Sep month is ending and comes Oct. The Oct month has also been the best month according to the Almanac. My view is that the seasonal pattern may have shifted in the last 2 months where Sep was supposed to be one of the worst month of the year but did not happen. So, Oct may bear the "pressure" this year....we'll see..

S&P500:Big Picture: (monthly)... Potential major Turning Point this month to the downside..
Medium term (weekly): Sideways to downside
Short term (daily): May move to the down side (look for lower high)
Weekly MACD: FTSE, Nikkei, ASX - DOWN (Bearish), SPX/ Nasdaq still UP (but watch closely as it has almost reached the May high (resistance) this year.

Commodities Corner: Orange Juice

Fundamental: (Source: CRB) Nov orange juice prices have faded for the
past 4 weeks as 3 successive hurricanes have turned north near Bermuda
and have not even approached Florida. The market is looking
for another small Florida harvest in 2006-07 due to the 2-years of
hurricane damage to trees, the spread of citrus canker and greening
disease in Florida, and urban sprawl. The USDA on Oct 12 will
release its first official estimate of the 2006-07 season, with the
Florida crop expected to be in the 140-150 mln box area, which
would be little changed from the poor crops seen in the last 2 years.
Large specs still had a large long position of 12,462 as of Sep 12
(42% of OI).


Technical: Weakness in OJ is seen on the daily and weekly, high possibility of continued downtrend in the coming weeks...near term support: 159.0

Trading ideas : (please apply your profit/ risk management rules in all trades, please note except options writing, all the other trades may last just several days)

Writing Options: Orange Juice OTM Calls
Futures: Short OJ
Options: NVDA (long puts)