Greetings everyone! In this holiday shortened week, we have a very important test for the markets. Last week's dip below 2000 on the S&P 500 was caught by the bulls and bought. This morning it looks like the bulls want to continue the buy-fest, perhaps even try a test of resistance around the 2045 area. It probably won't get there today, but might this week. 

I'm left scratching my head: why buy this market?  With oil still unstable and falling today, with China and the global economy getting a downgrade this morning on weak growth, with mixed earnings results so far (JNJ and MS are both down this morning), with Russia vs. Ukraine heating up again, and with terror threats in Europe a rising concern, it's hard to see why anyone would want to bid the market higher right now. I therefore fear that this is merely a relief rally and could trap unwary bulls if they are not careful.

As you can see from the chart below, gold is in a major breakout, with the 50ma beginning to turn up for the first time in 5 months.   This defensive positioning should worry those bullish on the dollar going forward. 

GOLD IN BREAKOUT MODE!

The dollar indeed looks toppy here, even as the GBP and the Euro remain in strong selloff mode. Fallout from "Franc-gate" continues, and there are now rumors that the ECB may pull off something similar with the Euro. It reports on a possible new stimulus this week (which must be what has the bulls all excited this morning). There is a lot of U.S. housing data out this week as well, and with mortgages at historic lows, if these numbers disappoint that could cause some heightened volatility. In short, there is no shortage of wild cards that can upset the markets here.

What are we planning to do?  What we've always done: profit from uncertainty!  In the Dr. Stoxx Options Letter  I specialize in short-term (1 to 2 week) profit generating options plays on the major indexes and ETF's.  I like to stay out of the market's way by selling premium to the speculators.  

And yes, we do some speculating too, when conditions are just right.  Why not join us?  CLICK HERE.

Blessings, TC