[10:46am] Across the pond we are expecting the Dow Jones to open 46 points lower, at 18,030, as today is the calm after the FOMC storm.
US index futures are trading lower but given that a June hike seems to be off the cards we should expect a fresh run at all-time highs.
This short-term pullback in the US market will provide an opportunity for the bulls to get back in the game.
Update by David Madden, Market Analyst,
[10:22am] A lowering of growth and inflation targets by the Federal Reserve caused a meltdown in the US dollar on Wednesday sending US stocks sharply higher.
A bounce back in the US dollar overnight is expected to send US stocks lower on the open of trading on Thursday.
Showing sensitivity to the possible reaction of stock and bond markets to its statement, the Fed chose to offset the removal of forward guidance by pushing out the dots on the 'dot plot' to suggest a slower pace of rate increases once they do start.
As stocks and bonds rallied, something had to give and that something was the US dollar.
The dollar plummeted; sending currencies such as the euro and British pound and numerous commodities including oil and gold soaring.
The dollar has strengthened again overnight but an extra level of determination will be needed to push major currencies and commodities to new lows given the size of the moves seen yesterday.
US Stocks Can Start Catching Up with Europe
Should the overnight strength in the US dollar start to melt away again, stocks have the opportunity to extend gains.
With expectations now pushed out to October for a US rate hike and a possible stabilisation of the US dollar on the cards, US stocks could have room to run on the upside.
Particularly in the light of the returns that have been seen so far in Europe this year, US stocks may have some catching-up to do.
Target shares went against the grain on news they are following suit from Wal-Mart and raising their minimum wage to $9 per hour.
Sports apparel brand Nike reports earnings on Thursday.
Futures suggest that the S&P 500 will open 2 points lower at 2,097, with the Dow Jones expected to open 24 points lower at 18,052 and the NASDAQ 100 1 point higher at 4,423.
Update by Jasper Lawler, Market Analyst,
FTSE Hits New All-Time High as Yellen Delays Rate Hike Expectations
After the FOMC statement removed the term 'patience' but replaced it with more dovish rhetoric, stock market indices surged and the FTSE hit a fresh intraday record high of 6994.
The dovish tone saw the dollar drop back sharply before recovering, with GBP/USD hitting $1.5185 before reversing back to $1.4813.
Update by Craig Inglis, Head of Product Development,
Dow Jones Daily Trading News
The Dow Jones is currently trading at 18,090.
In the last session, the market closed up 218pts (1.22%) at 18,073.
30 Minute Analysis
The stock market is trading lower than the 20-period moving average of 18,095.4 and higher than the 50-period moving average of 17,956.9.
1 Day Analysis
The stock market is trading higher than the 20-day moving average of 17,989.2 and higher than the 50-day moving average of 17,812.4.
Update by Gordon Childs, Editor,
[7:36am] Dow Jones Technical Analysis (30 mins chart)
Dow Jones pivot point: 17765
Our preference: Long positions above 17765 with targets @ 18070 & 18180 in extension.
Alternative scenario: Below 17765 look for further downside with 17610 & 17545 as targets.
Comment: The immediate trend remains up and the momentum is strong.
[7:32am] US indices jumped on Wednesday led by shares in the Energy, Utilities and Real Estate sectors.
The FOMC indicated that an interest rate increase could occur as soon as June, with a median rate of 0.625% by the end of 2015.
The S&P 500 (2099.5) broke above its 20 DMA (2089.8 - flat slope) and its 50 DMA (2061.6 - flat slope).
European markets are expected to start on a negative note.
[7:32am] American Shares - Crossing Over their 50 Day Moving Average:
3M (MMM +1.36% to $166.47)
AES Corporation (AES +3.69% to $12.64)
Anadarko Petroleum (APC +2.67% to $82.59)
Baker Hughes (BHI +2.55% to $60.76)
Becton Dickinson (BDX +2.09% to $144.51)
Boston Properties (BXP +2.63% to $141.13)
CA Technologies (CA +2.58% to $32.365)
Cabot Oil & Gas (COG +1.46% to $28.48)
Cimarex Energy (XEC +4.12% to $110.58)
Denbury Resources (DNR +7.58% to $7.95)
Dentsply International (XRAY +1.85% to $52.075)
Dover Corp (DOV +3.95% to $72.1)
Dow Chemical (DOW +1.95% to $47.54)
DuPont (DD +1.78% to $76.01)
Eaton Corp (ETN +1.24% to $68.52)
EOG Resources (EOG +4.45% to $90.66)
EQT Corp (EQT +2.05% to $79.02)
Flowserve Corp (FLS +2.73% to $58.38)
Frontier Communications (FTR +1.76% to $7.52)
Gap (GPS +2.54% to $42.33)
Goodyear Tire & Rubber (GT +3.95% to $26.05)
Halliburton (HAL +3.25% to $41.59)
Helmerich & Payne (HP +4.54% to $66.94)
IBM (IBM +1.82% to $159.81)
Kimco Realty (KIM +2.81% to $27.06)
Kinder Morgan (KMI +1.79% to $41.56)
LyondellBasell Industries (LYB +5.02% to $86.81)
Mead Johnson Nutrition (MJN +1.39% to $101.38)
Motorola Solutions (MSI +2.04% to $66.65)
Murphy Oil (MUR +4.34% to $49.29)
NextEra Energy (NEE +3.51% to $106.9)
Nisource (NI +4.41% to $43.77)
Noble Energy (NBL +5.5% to $48.12)
NRG Energy (NRG +4.15% to $25.34)
Oracle (ORCL +2.94% to $44.13)
Paccar (PCAR +1.86% to $63.735)
Parker Hannifin (PH +1.85% to $121.64)
Pentair (PNR +2.24% to $66.06)
Pitney Bowes (PBI +1.92% to $23.34)
Precision Castparts (PCP +1.65% to $211.59)
Public Service Enterprise (PEG +2.38% to $42.22)
QEP Resources (QEP +2.83% to $21.11)
Quanta Services (PWR +1.47% to $28.39)
Sempra Energy (SRE +2.79% to $112.31)
Spectra Energy (SE +3.78% to $35.7)
Stanley Black & Decker (SWK +2.31% to $96.65)
Stryker (SYK +1.33% to $93.11)
Twenty-First Century Fox (FOXA +3.1% to $34.92)
Tyco International (TYC +1.51% to $42.92)
Xylem (XYL +3.46% to $35.87)
Zimmer Holdings (ZMH +3.41% to $119.21)
American Shares - Crossing Under their 50 Day Moving Average:
Delta Air Lines (DAL -1.8% to $45.81)
Fedex (FDX -1.37% to $173.3)
Flir Systems (FLIR -1.35% to $31.51)
[6:13am] Last night the Federal Reserve gave the market what it wanted by removing 'patience' from its guidance language.
However, it did it in a manner equivalent to a sucker punch, following it up with the equivalent of a knockout blow to all those US dollar bulls who expected them to be much more hawkish.
The hawks will argue that yesterday's move frees their hand to raise interest rates when it suits, which is true, but it doesn't bring the prospect of a rate rise any closer.
It also obscures the fact that the central bank revised down its growth outlook, and slashed its inflation forecasts for this year, to 0.6% to 0.8%, from 1% to 1.6%.
Dovish FOMC Pushes Talk of Rate Hikes Further Out
With the Fed also guiding down its expectations for potential rate rises in the coming months as well, the fact that the FOMC was so guarded caught a lot in the market unawares.
This was particularly highlighted by the line about wanting to see further improvement in the labour market, suggesting that they felt that there was probably more slack in the labour market than originally thought.
With the recent surge of the US dollar weighing on exports, a fact that the Fed acknowledged, as well as inflation, the prospect of a rate rise in June, despite being remote, has been blown out of the water.
A lot of market watchers are now expecting a move in September, but even this seems extraordinarily optimistic.
The fact is that the Federal Reserve was always going to struggle to tack into the breeze at a time when central banks around the world are cutting rates, with the Swedish Riksbank once again easing policy yesterday afternoon.
US Bonds and Stock Markets Surge
As a result US bond markets and stocks surged as the prospect of easier policy for longer came back onto the table, with the S&P 500 returning to the 2,100 level it left behind two weeks ago.
Crude oil also rebounded sharply as the dollar weakened, despite data showing that stockpiles increased again, while gold prices also rallied sharply.
The spill over effect of yesterday's US dollar sell-off and sharp euro rebound will be felt in European markets this morning, with the German DAX expected to open lower.
The FTSE 100 should open higher after receiving a significant boost from yesterday's actions by the UK Chancellor of the Exchequer to alleviate the tax burden on the oil and gas sector, and the moves to help savers which helped boost asset managers and life assurance companies.
Given yesterday's caution on the labour market today's weekly jobless claims will once again take on a new resonance in the wake of the recent slowdown and reduction on rig counts, with expectations that we could see them come in at 293k, up slightly from last week's 289k.
Update by Michael Hewson, Senior Market Analyst,
[6:01am] European equities are set to start mixed as traders take different spins on the dovish FOMC overnight.
Whilst the UK FTSE is still basking in the post budget giveaway, the cooling of hawkish temptations from the Fed has added to that bullish sentiment.
However, over on the continent the Germans, the world's third largest exporter, aren't enjoying the prospect of a weaker dollar/stronger euro hitting their economy.
This has led the German DAX lower on the open, whilst the French CAC doesn't seem to have made up its mind yet.
As widely expected, the FOMC dropped the code word 'patience' from its statement, however, it was replaced by dovish rhetoric from Yellen.
The statement spurred speculation that the Fed is in no rush to raise interest rates and highlighted its uneasiness about the modest economic data seen recently.
With an imminent rate hike seemingly off the table, the Dow Jones rallied steeply, gaining 218 points to 18,068.
Update by Jonathan Sudaria, Market Dealer,
[3:53am] The Dow Jones futures market closed higher on Wednesday. The high-range close sets the stage for a steady-to-higher opening on Thursday. Stochastics and the RSI are neutral-to-bullish signalling that sideways-to-higher prices are possible near-term. If the Dow extends this year's rally into uncharted territory, upside targets will be hard to project. Closes below the 20 day moving average crossing are needed to confirm that a short-term top has been posted.
[3:51pm] US Stock Markets
US markets sank in early trading on Wednesday ahead of the statement from the FOMC and the press conference held by Fed Chair Janet Yellen.
Apprehensions are brewing over the possible removal of forward guidance from the latest statement by the Federal Reserve, possibly green-lighting the first rate-hike since 2006.
FedEx shares traded lower despite beating on quarterly profits after missing revenue estimates.
Shares in Oracle traded over 4.5% higher as the software-maker met earnings estimates and raised its quarterly dividend by $0.25 per share.
The stock price of Adobe Systems fell by as much as 4% as the company reported better than expected earnings but a slowdown in the increase in subscribers to its cloud-service.
Update by Jasper Lawler, Market Analyst,
[10:36am] US equities are expected to open slightly lower on Wednesday.
There are some apprehensions brewing over the possible removal of forward guidance from this evening's statement by the Federal Reserve, possibly green-lighting the first rate-hike since 2006.
Will it Stay or Will it Go?
Consensus is for the 'patience' language with respect to the timing of a rate rise to be removed.
Should 'patience' stay; a sell-off in the US dollar and a stock market rally could be in order.
Janet Yellen's Fed has shown itself to be very conscious of market reaction to its announcements, not surprising given the distortions its policies have caused.
With its sensitivity to markets in mind, the Fed could choose to offset the removal of forward guidance by pushing out the dots on the 'dot plot' to suggest a slower pace of rate increases once they do start.
Given that the ECB and Bank of Japan have boosted global liquidity conditions back close to levels seen during the Fed's QE program, equity markets remain supported and could eventually ride out the Fed's decision.
Should the Fed actually remove 'patience' and imply a slower rate increase via the dot plot; then stock markets may accept their fate of a rate hike and take a slower rate of increases as a net positive.
Should the Fed remove the patience language and keep the dots unchanged or imply higher rates sooner, all bets are off and we could be in for a big slump in stocks and a continuation of the dollar rally.
Oracle reported earnings in-line with estimates and shares are expected to rise slightly on the open.
With earnings season all but over, one of the last few important releases to pay attention to for the assessing the overall market is FedEx.
The delivery company is a bellwether for the health of the US economy with more deliveries signalling stronger consumer and business demand.
Expectations are for $1.87 per share on revenues of $11.8bn.
Futures suggest that the S&P 500 will open 2 points lower at 2,072 with the Dow Jones expected to open 19 points lower at 17,830 and the NASDAQ 100 2 points lower at 4,373.
Update by Jasper Lawler, Market Analyst,
[10:11am] Will she or won't she?
The question on everyone's mind is will we see 'patience' omitted from the latest FOMC statement at 6:00pm tonight.
Currency markets have already voted with their feet and pre-emptively moved on its absence and more hawkish phraseology coming from Janet Yellen.
The last couple of weeks have seen the dollar move into overbought territory, and although the last 48 hours have seen a small correction this is only likely to be a little bit of profit-taking before today's statements.
Ahead of the open, we expect the Dow Jones to start just four points higher at 17,853.
A spreads account would also let you speculate on short-term daily Dow Jones markets. Users should note that accounts are normally subject to suitability, credit and status checks.
Should your application be approved then you can log on and study the charts and the current prices. These are normally free. Having said that, you might get the occasional sales letter or email from the spread trading company.
Of course, if you do trade then, before starting, you should note that CFD trading and financial spread trading carry a high degree of risk to your funds and can result in losses that are greater than your initial investment.
Advanced Charts for the Dow Jones
Although charting software/packages can vary across the industry, to help your analysis of the Dow Jones, they often come with useful tools like:
Drawing features and options e.g. Trendlines, Fibonacci Arcs, Fans and Time Zones
Different display options e.g. candlestick charts and bar charts
A host of different time periods e.g. 1 minute, 3 minute, 5 minute, 15 minute, 1 hour, 1 day etc.
The Dow Jones Industrial Average, often referred to as the Dow, Dow 30 or Dow Jones, is one of the world's most well known markets.
The Dow represents a selection of thirty of the biggest American public companies. It's used to measure the performance of these corporations whilst also reflecting the state of the American economy and, to a degree, the world economy.
In spread betting and CFD trading, rather than being called the Dow, Dow Jones or Dow 30 it is often called 'Wall Street' or the 'US 30'.
Dow Jones Spread Betting: Firms with High Share Prices are the Most Important
If you want to profit from trading the FTSE 100, the biggest corporations are the most important. Because of the way the FTSE 100 index is weighted, movements in the share prices of the largest corporations affect the FTSE 100 index more than price movements in the shares of smaller companies.
However, the Dow Jones Industrial Average is not 'price weighted'. This means that a one point increase or decrease by any share in the index will have the same effect as a one point increase or decrease of any other share.
As of April 2012, share prices on the DJIA range from around $8-9 (Bank of America and Alcoa) to almost $210 (IBM).
So, a 10% shift in IBM's share price (around $21) would account for a large movement in the Dow Jones index (around 160 points).
However, a 10% shift in Bank of America's share price (around $0.90) would only lead to a very small change in the Dow Jones (around 7 points). This isn't because IBM is a bigger corporation, it is because IBM's share price is much higher.
The other high value shares to watch out for in the Dow Jones are, as of April 2012, Caterpillar, Chevron and McDonalds.
Dow Jones Stock Market Index: Different Trading Times
The Dow is based on Wall Street however, not all 30 companies that make up the DJIA are based on America's East coast.
So, when the Dow Jones opens for trading, the value is determined only by the relatively few companies that open first. The opening price on the Dow will therefore always be close to the previous day's closing price.
As a result, the Dow Jones will never accurately reflect the true opening prices of all its companies.
If you are looking to trade on the Dow Jones, you need to be very careful when you open your position. Whilst the FTSE 100 might 'hit the ground running' with all companies opening at the same time, the Dow Jones doesn't work in the same way. Investors should monitor opening and closing prices so they can be confident of opening a position at the right time.
Dow Jones Spread Betting: Know the Shares
One of the advantages of trading the Dow Jones is that there are only 30 corporations in the index. Therefore it's easier to keep an eye on each of the component companies and what's happening to their share price.
Some traders believe that it is good practice to have a number of shares that you regularly follow. The aim of this is to get to know these shares and become familiar with their price movements.
Keeping tabs on all FTSE 100 companies is tough, it's hard to know exactly what is happening to all the shares at any given time. However, watching 30 Dow Jones stocks is more manageable. You can get to know each company's typical share movements and that can help you forecast where the Dow Jones will head next.
Speculating on the stock market always comes with a degree of risk. However, if you would like to use a Demo Account, that allows you to practice spread betting on a wide range of markets, please see below for further details.
When you think about which investment option is right for you, don't forget that, in the UK, financial spread betting is currently tax free*.
If you are trying to find a low cost financial spread betting website then keep in mind that you can trade the Dow Jones without having to pay any commissions or brokers' fees through companies such as:
Each of the spread betting companies listed above offer a Test Account which lets users apply a range of trading orders, test new trading ideas and review stock market charts.
How to Spread Bet on the Dow Jones?
As with a wide variety of financial markets, investors can spread bet on indices, like the Dow Jones, to either rise or fall.
If you go to the Financial Spreads platform, you can see that they have priced the Dow Jones Rolling Daily market at 13343.0 - 13345.0. This means that an investor could put a spread bet on the Dow Jones index:
Moving above 13345.0, or
Moving below 13343.0
When you spread bet on the Dow Jones index you trade in £x per point, where a point is one point of the index itself. As a result, if you invested £4 per point and the Dow Jones moves 26 points then that would be a difference to your profit/loss of £104. £4 per point x 26 points = £104.
Rolling Daily Indices Markets
This is a Rolling Daily Market which means that there is no set settlement date for this market. You do not have to close your position, should it still be open at the end of the trading day, it simply rolls over to the next trading day.
If you do let your position roll over into the next day and are spread betting on the market to:
Go higher - then you are charged a small overnight financing fee, or
Go lower - then a small payment is normally credited to your account
Now, if you think about the spread of 13343.0 - 13345.0 and assume that:
You have analysed the indices markets, and
You think that the Dow Jones index will increase and move above 13345.0
Then you may go long of the market at 13345.0 and invest, for example, £5 per point.
Therefore, with this trade you make a profit of £5 for every point that the Dow Jones index moves higher than 13345.0. However, it also means you will lose £5 for every point that the Dow Jones market moves below 13345.0.
Considering this from another angle, if you were to buy a spread bet then your P&L is worked out by taking the difference between the final price of the market and the initial price you bought the spread at. You then multiply that price difference by the stake.
Therefore, if after a few days the US stock market moved higher then you might think about closing your trade and guaranteeing your profits.
Taking this a step further, if the stock market did go up then the spread might change to 13380.4 - 13382.4. You would close your spread bet by selling at 13380.4. As a result, with the same £5 stake your profit would be calculated as:
P&L = (Closing Price - Initial Price) x stake
P&L = (13380.4 - 13345.0) x £5 per point stake
P&L = 35.4 x £5 per point stake
P&L = £177.00 profit
Trading the American stock market is not simple. In the above example, you had bet that the US index would rise. Of course, the stock market can fall.
If, contrary to your expectations, the Dow Jones fell, then you might decide to close your trade to stop any further losses.
So if the spread pulled back to 13313.1 - 13315.1 you would close your position by selling at 13313.1. This would result in a loss of:
P&L = (Closing Price - Initial Price) x stake
P&L = (13313.1 - 13345.0) x £5 per point stake
P&L = -31.9 x £5 per point stake
P&L = -£159.50 loss
Note - Dow Jones Rolling Daily spread quoted as of 11-Sep-12.
How to Trade Dow Futures
Looking at a site like InterTrader, we can see they are currently offering the Dow Jones December Futures market at 13408 - 13414. This means an investor could speculate on the Dow Jones index:
Closing above 13414, or
Closing below 13408
On the expiry date for this 'December' market, 21-Dec-12.
As with the daily market above, you trade the Dow Futures in £x per point. So if your stake is £5 per point and the Dow moves 27 points then that would make a difference to your profits (or losses) of £135. £5 per point x 27 points = £135.
Dow Jones Futures Trading Example
If we take the above spread of 13408 - 13414 and make the assumptions that:
You have done your analysis of the American futures market, and
Your analysis suggests the US index will settle above 13414 by 21-Dec-12
Then you could decide to buy the market at 13414 and risk, for the sake of argument, £2 per point.
With this contract you make a gain of £2 for every point that the US index moves higher than 13414. Nevertheless, you will make a loss of £2 for every point that the Dow Jones market goes lower than 13414.
Put another way, with spread trading, your profits (or losses) are worked out by taking the difference between the closing price of the market and the price you bought the market at. You then multiply that price difference by the stake.
So, if on the expiry date, the Dow Jones closed at 13488, then:
Profit / loss = (Closing Value - Opening Value) x stake
Profit / loss = (13488 - 13414) x £2 per point stake
Profit / loss = 74 x £2 per point stake
Profit / loss = £148 profit
Of course trading the American stock market futures is rarely that straightforward. In the above example, you wanted the Dow to rise. Of course, the stock market index could fall.
If the futures had fallen and settled at 13334 on the expiry date, then you would end up losing this trade.
Profit / loss = (Closing Value - Opening Value) x stake
Profit / loss = (13334 - 13414) x £2 per point stake
Profit / loss = -80 x £2 per point stake
Profit / loss = -£160 loss
Note - Dow Jones December Futures market taken as of 27-Sep-12.
Risk Management: Spread Betting on the US Stock Market with a Stop Loss
You can put a limit on the size of your position to help reduce your potential losses without impacting your upside. You can also employ smaller stake sizes such as £1 per point or $1 per point.
Letís say you spread bet on the Dow to go up, with a £1 per point stake and attach a Stop Loss order to your trade. If the US stock market goes up by 120 points then you would make 120 points x £1 per point = £120.
You are also able to trade the markets in Euros and Dollars. If you want to trade in dollars then 120 points x $1 per point = $120.
Of course if the market went against you, dropping by say 90 points, then with a £1 stake you would lose 90 points x £1 per point = £90.
Obviously this would be a fairly poor start. However, with firms like Financial Spreads you can add a Stop Loss at let's say, 30 points.
If you were trading the Dow this would mean that your position would be closed if the US index moved against you by 30 points. Therefore, instead of losing £90, you'd only lose 30 points x £1 per point = £30.
However, assuming you correctly predicted the direction of the market, your upside would still be £120.
Note that Stop Losses are not guaranteed, if a market slips then your Stop Loss is closed out at the next traded price. If you donít want that risk then you can use a Guaranteed Stop Loss, these are guaranteed to close your trade even if the underlying market slips (gaps).
A number of firms like Financial Spreads, InterTrader and Capital Spreads automatically apply a Stop Loss to every trade. You can upgrade to a Guaranteed Stop Loss but that normally comes at a small premium (normally a wider spread).
'Dow Jones Spread Betting' edited by Jacob Wood, updated 23-Mar-15
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Dow Jones Spread Betting
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