Chief Editor
The US markets partied big time last Friday showing no signs of wanting to ease up. US durable goods June actuals came in at 2.1% against a "street" estimate of 1.0%. This positive surprise along with a June improvement in new house sales plus more corporates exceeding earnings estimates was enough to excite investors going into the weekend.
The "VIX" which is a volatility index (I covered in a previous issue of Trading Tutors) closed below 20 - the first time since May 2002 when the DOW was last above 10,000 and of course at that time it subsequently fell to 7500. The VIX is regarded as a "confidence" index and below 20 for an extended period is regarded as "market complacency". As markets climb investors develop a "feel good" mind-set and that is when the market can surprise.

Typically the US upbeat move on Friday will be carried through to our markets on Monday - albeit in a more subdued manner. It could provide an added fillip for our XDJ, Consumer Discretionary which has already had a sound run but drifted in the last week or so.

A raft of economic news due out in USA this week may change the market tune. I am not being pessimistic - I remain an investor - but just cautious. Especially cautious for any new entrants at this time. When the market retraces there will be "buy" opportunities in abundance.

With the exception of Utilities, Financial Sector, Property Trusts and Consumer Staples most Australian indices are showing some resilience although some I suggest have been "dragged" along by the momentum of the overall market.

We continue this week with our series on Options. They become an even more useful tool as markets become more unpredictable. Many of you have noted that the terminology that Mike uses is that which applies to the US market. Many of our readers are actually trading the US - options market because of the greater leverage available there. Next week I will look at the some of the differences between the two markets. Stay with Mike's series as the lessons learnt will not only give you an introduction to Options but will be of value in your overall trading.

Tom Scollon