G’day Traders,

IF you are an Options trader make sure you have no unwanted stock positions today – you need to contact us as soon as possible if you have a stock position, especially if you use Trade For You. If a client has an unwanted position and doesn’t advise us then we can’t be responsible for any losses.

Well I can’t miss talking about the Australian election today as it is affecting markets. The AUD is down due to the likely hung parliament result (but has rallied since the open). This was an outcome I thought likely and long term, positive for Australia. This is simply because US stock markets traditionally perform better when there is a mix of parties (when different parties control each house). I also believe changes in the way parliament works will be positive and because the three incumbent reps are high quality representatives.

Short term though, experts are predicting Australian markets will suffer. Long term I think what is good for regional Australia is probably good for the economy.

On Twitter I talked about a few things:

- US Real Estate and Foreclosures. There are a couple of things here and one is that it’s being written about. This tells us that it is moving to the front of people’s mind and a lot of houses have to be sold by banks. This means watch the US real estate ETF, which is still not short.

The choppiness is a sign to me and a break out on the downside could have horrible ramifications for the economy. Also, it is a good indication of what could happen in Australia and I think after a real acceleration in prices it puts me on edge. Accelerating prices in a bad economy often points to the end of a bullish move.

- The ECB comments are really negative. Seriously when you have someone like Weber saying this kind of stuff it has to affect confidence and it hurt the Euro, Oil and stocks as people moved to the USD and Treasuries.

- In Sugar, India may restart exports and Sugar is at five month highs. This means to me “stay long” because if the market keeps going up it’s a good sign. However, there could be a really good short opportunity if this becomes more likely.

- Pakistan… need I say more? The Mosque at Ground Zero is bigger news… I mean really. Because of this, no aid is going to a country that has nukes, is politically unstable and is a shelter for Al Qaida. Didn’t Australia want to sell Uranium to India under Howard? I don’t know, this situation is deteriorating, but it is happening so slowly we are used to it. This flood could be the tipping point and if so where are we going?

The US S&P500 -0.37, European top 500 -0.76 and UK -0.31%. China fell almost 2% Friday! In early trade Asian markets are flat… even the ASX – what a surprise, the experts get it wrong again!

ETFs - Good idea to wait until the monthly update on shorts. This market looks weak, but I suspect no huge moves for a couple of weeks (and by huge I mean >3% fall in one day).

Options – I am going to try to get a balanced portfolio this month, but I will be sure to have ‘auto-exits’ on – otherwise I just wouldn’t risk it.

Critical information – All Option traders must check that they have no unwanted stock positions. This market could break down (or even up) and if you have a stock position you want to dump it fast. You will need to double check everything tomorrow and if there is something you are unsure of contact Customer Service.

Today’s Top Tip

Keep up to date with all my latest thoughts on developments in the markets via Twitter: http://twitter.com/lifestyleIS

Information for Beginners – Do not make the mistake of thinking short term and making reactive decisions. Follow your strategy and think long term. This will help you make smart decisions, which leads to profit. I would say this is a sideways market going into a falling market for stocks, which means Forex should improve.

Information for Intermediate – Watch Sugar – I think it’s a great long, but we could get a nice short.

Information for Advanced – It’s difficult. I would say trends will increase, but you may be waiting a little while.

Scott Goold

Head of Lifestyle R&D

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Trader Term of the Day – Divergence

The failure of a market or indicator to follow suit when a related market or indicator sets a new high or low. Some analysts look for divergences as signals of impending market tops and bottoms.