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November 16, 2012  Fri 7:08 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
Stocks are continuing lower today as public-sector uncertainty continues to sap confidence.

Futures on the S&P 500 are down by more than one-tenth of a percent, following losses of about half a percent in Europe. The index has slid 6 percent slide over the last month and is now decidedly below its key 200-day moving average for the first time since December.

While signs of recession have worried investors, the main drivers are in the political realm as politicians in Europe and the United States fail to reach decisive solutions to runaway public-sector spending. Mounting violence in the Middle East is also hurting sentiment.

Japan is also in the midst of a major political upheaval after its prime minister dissolved parliament. That caused the Nikkei index to rally more than 2 percent on hopes that the new government will increase stimulus measures.

Foreign-exchange and commodity markets are reflecting a cautious tone. Currencies associated with risk, such as the euro and Australian dollar, are lower, while the Japanese yen is climbing. Energy futures are mixed, but copper, metals and most agricultural foodstuffs are down.

Several companies are moving in pre-market trading. Gap raised guidance and Aruba Networks beat expectations, sending both stocks up by about 4 percent. China Internet stock Sina fell on a weak set of numbers, and casino operator Penn National Gaming surged more than 20 percent after announcing that it would become a real-estate investment trust to avoid paying taxes.
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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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