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June 18, 2013  Tue 7:10 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
Stocks are trying to advance this morning after holding key levels yesterday.

S&P 500 futures are fractionally higher, while most overseas markets have posted small gains. Perhaps most importantly, the Japanese yen continued to weaken against the U.S. dollar and euro.

Stocks have been consolidating for almost a month after a blistering half-year rally that propelled the S&P 500 7 percent above its previous all-time highs. Attention has focused during this time of weakness on a stronger yen and worries about reduced asset purchases by the Federal Reserve.

Investors will face that news tomorrow when the Fed announces monetary policy and Chairman Ben Bernanke holds a press conference.

Despite the media's obsession over the central bank, the bigger story may be ongoing evidence of a strong economy in the United States and now Europe. Germany's Zew survey of economic sentiment came in better than expected, anticipating a possible acceleration of growth in the second half. Japan also recently revised its first-quarter numbers higher and is showing signs of emerging from a 20-year funk.

Today's agenda brings the consumer-price index and housing starts at 8:30 a.m. ET.

The S&P 500 closed over its 10-day moving average for the second time in three sessions yesterday. It also appears to have broken a short-term downtrend in place since May 22, which could signal a change in sentiment.

Our proprietary researchLAB market screener shows money flowing toward industries associated with stronger incomes, such as home builders and luxury goods. Emerging markets and coal miners have lagged as former boom economies in China, Brazil, India, and Russia stagnate.

Foreign-exchange trading is mixed. The yen's weakness across the board is generally bullish, though the euro is little-changed and currencies associated with commodities, such as the Australian and Canadian dollars, are down.

Oil fell by about one quarter of a percent and copper declined more than a full percentage point. Precious metals are also fractionally negative.

In company-specific news, Sony is up 4 percent after hedge fund Third Point increased its stake in the electronics firm and pushed for a spinoff of its entertainment business. Boeing may also be active after announcing it had received several orders for its new Dreamliner aircraft.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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