Markets took news of the Fed’s lack of added stimulus a bit harder than anyone really expected. After a 2 day meeting, the federal Reserve, headed by Ben Bernanke, decided not to take more aggressive steps in its current stimulus package. The method of increasing liquidity in the market by purchasing bonds has been carried out by the bank for many months now but the market seemed to expect this stimulus package, dubbed “Operation Twist” to get more feisty. When word came out that this would not be the case, markets took it relatively hard. The thing is, the Fed will in fact continue with the plan, just not more aggressively than what has been done until now. As a result, the US stock indices ended mixed as the Dow and S&P finished slightly lower while the Nasdaq inched higher by 0.02%. Fundamental Economics will remain the focus today as well as binary traders await the release of some major news from Spain and the US.
Spain has been and will continue to be a major focus for investors globally as many believe that the 100 billion EUR bailout package will simply not be enough to really pull the Spanish economy out of the mess they are in. Today, there is expected a government debt sale of a number of bonds. If the results are good, it could push European and US markets higher. Binary options traders who are unfamiliar with bonds will simply need to look for signs of the good news. How do you know if a bonds sale was good or not ? Quite simply, look for the word “yield”. If yields head higher, it’s a bad thing. If they head lower, it’s a good thing. What yields really mean is what interest rates are required to borrow more money. So if the Spaniards want to borrow more money and the market is willing to lend at a lower rate, this is a great sign that things are getting more stable and secure. If on the other hand, lending rates head higher, it means the market is not comfortable lending money to Spain at the current rate but is willing to take on more risk given a higher return. The debt sale will begin this morning and run the remainder of the day. So the real outcome may not be known till after the US trading session begins.
As such, trading stock indices may be a bad move today as the news from Spain can really put the hurt on indices and forex alike. Focusing on individual stocks could be a much better option today for binary trader. Google (GOOG) for example is a good one to watch. After a losing session yesterday, the stock price is likely going to gravitate towards the closest resistance level at 596.5. Although a bit of a stretch, it could reach the level today. Any break will allow binary traders to take Up options. It has been reported from Goptions.com that volume on the stock has headed higher in the last 2 days and this could indicate market willingness to take more risk. We recommend keeping a close eye on the stock today as any move above this level is a great Buy signal. Stock traders of all types should take notice, not just binary options traders. The reason is, any break of this level will usher in more buyers and we don’t expect the market to head back below the level during the same trading session.