| Wednesday, July 29, 2020 1. Stocks lift on Fed news ahead of big earnings day tomorrow 2. Gold continues its rise 3. One method for anticipating a dip Market Moves Both the S&P 500 (SPX) and the Nasdaq 100 (NDX) rose 1.24 percent today. Most of it came even before the Federal Open Market Committee (FOMC) announcement. Fed Chairman Jerome Powell reported that the committee remains determined to hold rates firm and pledged ongoing support during the COVID-19 recovery. This sets a slightly bullish stage for some important quarterly earnings reports from Apple (AAPL), Amazon (AMZN), and Facebook (FB) after the bell tomorrow. Investors and analysts have begun to count the hours with anticipation.
The chart below shows just exactly what option sellers, who make a living trying to estimate such things, are anticipating in the way of price moves. The red regions on all three chart panes below map out what option sellers consider the high-probability region for price moves. The green areas are between one and two standard deviations of price movement, so the more likely end point after earnings should be within the red regions.
Another way to think about these regions is to imagine someone who bought a call option today and expects to hold it until Friday. Each of these stocks would have to move above the red regions before that call option would likely pay off. Pessimistic option players who bought put options would have to see the stock drop below the red regions in order to begin making a profit from their trade.
Experienced option traders know that this chart is an oversimplification because options offer a dizzying array of strategies. However, this depiction can inform chart watchers what experienced traders are expecting for tomorrow. The most important insight tomorrow will come from any move beyond these regions. That would represent something unexpected, and something worth noting for estimating the emergence of future trends.  Gold Continues its Rise 
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One Method for Anticipating a Dip The rise in gold and silver prices may be difficult for some traders to jump into at this point. One way to consider it might be to use VanEck Vectors' Junior Gold Miners ETF (GDXJ) as a vehicle. This index-based ETF captures the influence of gold prices, silver prices and small cap companies (in this case mining companies) all at once.
The chart below uses a Fibonacci Time Series anchored to the low point in the most recent price trend and also measures Fibonacci Retracement levels from the recent trend high point. This method produces the yellow and green shaded price regions that might be worth targeting in the near future--assuming a trader took reasonable efforts to limit risk (such as using position-size rules and stop loss orders).  The Bottom Line Investors showed optimism before, during and after the FOMC meeting announcement today. The earnings reports that will follow tomorrow's session could benefit from this. Other assets besides stocks, such as gold, oil and emerging markets assets could benefit from the Fed's commitment to help ease the current economic crises.
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Wednesday, July 29, 2020
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