Morning Commentary for Thursday, August 12, 2010 – Is the Summer Rally Over?

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E-mini S&P 500	1079.25	-5.75
EUR/USD	1.2793	-0.0085
30-Day Fed Funds	99.825	0.0000
Gold	12007.2	+8.0

The markets had a strong reaction to the FOMC meeting on Tuesday. We’re still feeling the effects this morning. Markets are trading a bit lower and should open down. I don’t expect the markets to be too crazy today. Just a little follow through on the downward momentum. The jobless claims report just came in at 484K. Consensus was 460k to 470k so it was a little higher than expected. We have Consumer Price Index and Retail Sales reports tomorrow, both at 8:30 AM Eastern. They could move the market.

There were several articles I read that the S&P has broken trend lines and that the summer rally may be over.

The Euro had a 2.3% loss yesterday which is HUGE for a currency. I think it was the largest one day loss is about two years. To put it in perspective, currency traders trade in pips, or 0.0001 of a dollar. A typical day’s movement is 50-100 pips. Yesterday was something like 300 pips. There are opportunities with currencies and options trading ETF’s, or futures options. The strategies work the same as they do with stock or index options. I started trading currency options a few years ago to diversify a bit. Lately, the currencies seem pretty correlated.

I think today will be a consolidation day (on the down side a bit) with some flat to slightly upward movement tomorrow going into the weekend. As always, these volatile markets dictate that you use prudence. Lock in profits, use protective long calls and puts and honor your trading plan maximum losses!