The FTSE having sold off in very early action rebounded strongly as sellers ran out of steam. The recovery was broad and took the entire day with a steady move higher throughout the session. Yields on many stocks look very good value (assuming there are no dividend cuts) and this has obviously brought some of the value buyers into play. The UK outperformed almost every other index as investors tried to make up for the national football team's seeming inability to hit a small round object in the vague direction of goal by buying everything non retail focused.
The early call this morning is for the index to open about 10 higher around 6164-6165 but we are seeing quite a bit of profit taking from clients who held on for most of yesterdays move. The Dax is not helping much as it is now 14 off from yesterdays close meaning that, while the FTSE has gained some 100 points in the last 24 hours, the Dax has only achieved around 25. Over the past month the German index has traded rather boringly, getting into trading ranges and then over a trading session moving to another. If you get the one or two days move incorrect or are not in play that day then there has been precious little to go for.
The Dow spread betting market is also not really joining in the game with the Futures advancing a paltry 40 pips after being closed yesterday. The S&P Spread Betting is already giving up some of yesterday's 'out of hours' rally off 3 points from the UK 16.30 close at 1420.0-1420.4. At this price we are almost exactly 10% off the October (all time) highs which, if we manage to recover now, would be termed just a small correction for future chart watchers. There is solid support at 1406.0 and way below at 1330 being the medium and long term trend supports. The Dow has breached the medium term support at around 12950 and the fear must be for a move lower to year lows at 11930 and the long term support at around 11600. With fears over the US economy long term investors are trying to weigh up current value (which is undeniable) against future prospects (which are rather murkier).
Indices Spread Betting Comment, 22 Nov 07
The FTSE gave up all of Tuesday’s rally yesterday, and some, and this morning is coming in just off the closing levels at up around 10 at 6092-6093. Actually this isn’t too bad, as of 9pm yesterday we were quoting the index fully 30 points lower than this on a 200+ point drop in the Dow. Overnight the Nikkei, Hang Seng and ASX have decided not to join in, for one day at least, the fall out. However it must be said that their stability is after a truly awful performance on Tuesday. As mentioned yesterday if we close below 6115 the technical’s would seem to indicate a change from bullish to neutral so there may be a concerted push to get us back above here. There are also crucial support levels at between 6060 and 6075 and the long term bullish trend line currently at around 5960. One of the worrying things is that previous fall outs over the past few years have been short sharp correction affairs, soon over and soon forgotten. This time the move just seems to go on and on. The short sharp corrections are the rallies not the falls.
As mentioned, today is a holiday in the States and in time honoured fashion this generally means that tomorrow is quite dead as well. With any luck the markets will take this opportunity to pause for breath and take stock of valuation levels etc. I know the Capital Spreads dealing teams are hoping for a small oasis of peace and quiet in the never ending volatility of the past few months. One of the problems is that, occasionally, when the liquidity of the US goes away the markets go absolutely bananas and move in sharp shifts as traders hunt for support and resistance levels and their associated stops. This is often seen in the FX markets so punters will be watching for evidence in early action.
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Indices Spread Betting Comment, 21 Nov 07
So the FTSE was off 170 on Monday up 100 on Tuesday and off 100 this morning. It is nice to live in such secure and reasoned times.
At the close last night it all looked so much nicer with the US rejecting another attempt to go lower and the FTSE having already settled, as mentioned, 100 up on the session. This time the Far East was having none of it and the Hang Seng slumped over 1000 and the Nikkei over 400 as fears over credit and growth continued to swirl. The weakness in the dollar is now impacting revenue across the globe as margins get squeezed.
The FTSE is slipping to around the 6125 level but the indices have been struggling to force markets lower than this over the past few days. That will probably tempt in some short term buyers. A close below 6115 would trigger quite a few sell orders as this is the level in May 2006 which was the high watermark for that bull run. Every time we have threatened this level over the last year it has either seen good support or seen a further sharp sell off.
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Indices Spread Betting Comment, 20 Nov 07
This morning's move higher seems to be rather more firmly based than the rather odd initial move yesterday. As readers of this comment will remember Capital Spreads clients were buying on the open yesterday and the market eventually peaked up 40 pips (a respectable day). The market then lost faith and dumped 170 on the back of renewed Financial woes.
The FTSE 100 has bounced neatly off the September lows of 6115 and the early spread is 6162-6163, up 40 on the close of yesterday afternoon. The catalyst for the move higher has been some better than expected post close corporate numbers from the States and a bit of a bounce in the Far East with the Nikkei ignoring yesterday’s weakness and adding a 1% rally to Monday's close. The US markets have taken heart as well, the Dow is now trading 90 points up from last night at 13054-13058 and the S&P up 11 at 1445.0.
Indices Spread Betting Comment, 19 Nov 07
The FTSE spread betting market opened flat but is trading some 20 points higher and our Financial Spreads clients are happily buying from the bell. With hopes of rate cuts on the horizon investors seem to be looking for yield rather than trying to ponder the overall economy. If ten thousand highly paid economists cannot forecast events then traders may as well just react to incidents as they happen.
At 6310-6311 the FTSE 100 is hiding some curious dislocations with banking stocks looking the cheapest for years whilst miners seem to be indicating that commodity prices will just go higher and higher ad-nauseam. Oddly enough copper hit an eight month low overnight in the Far East which seems to fly in the face of this conventional wisdom, and this is in a product that actually gets used up as it is produced.
The Dow bounced off 13050 for the second day in a row and the index looks to be building support between 12970 and this price. Unfortunately overall the price action is showing increasing evidence of a step lower sequence with each rally failing below the highs of the last. Unfortunately, again, the moves are now getting so large that it is very dangerous even to trade on the most conservative of assumptions as a daily reversal can easily be in the region of 300 points. Wise punters remain on the sidelines unless an obvious opportunity presents itself. Of course all the excitement of the current volatility means that 'wise punters' are very much in a minority. Volumes across the globe are increasing almost on a daily basis as was seen by the LSE's 72% increase in their last trading update.
Indices Spread Betting Comment, 16 Nov 07
We're calling the FTSE Spread around 30 points lower this morning to around the 6330 level following another bad day on Wall Street and across Asian. These are testing times for the world indices. News that some of the banks may have their debt ratings cut will probably hit the sector today, however clients seem to think the opposite having generally bought on their recent weakness. There have also been rumours that another bank has approached our "lender of last resort" for emergency funding. Barclay's shares have bounced healthily from their multi-year low of 441p where we saw a great deal of buying from clients. They are firmly back above £5 and could be active today.
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Indices Spread Betting Comment, 15 Nov 07
Yet again a late sell off in the US took the shine off things but the UK seems to have ignored the move and is opening unchanged this morning. Mervyn 'Prophet of Doom' King must be slightly miffed that his dire warning of a potential substantial fall in the world equity markets has been completely ignored...by everyone. Whenever central bankers make an over market comment every one always remembers Greenspan’s 'irrational exuberance' speech of the nineties. What is less well known is that after the initial drop on his comment the markets rallied for thousands of points to the upside and have never even looked remotely like returning to where they were when he made the statement.
This morning sees the FTSE spread being called unchanged at 6434-6435 having been quoted as low as 6400 last night as the US market fell out of bed in the last hour of trading. Punters seem confident and are continuing to buy both European and US stocks and indices as the 'Credit Crunch fall out' rather conspicuously, fails to arrive. Of course the effects of weakened banks will take time to filter through to the general economy but enough of the big players seem confident in buying to make a difference. If we go to the upside the obvious first resistance level is 6460 where we failed yesterday. The entire area between 6450 and 6470 has proved over the past year to be a significant support and resistance level.
Indices Spread Betting Comment, 14 Nov 07
We are calling the FTSE spread up some 65 points this morning at 6426-6427 and investors are humming at their PCs as the feeling of well-being seems to be suddenly in the air. The results from Goldman (who else) and BOA gave the push that was needed to the markets. My comment yesterday about how the entire world seemed to have been caught up in the Sub Prime debacle has been answered by the good folk round Goldman Sachs way who have rather neatly side-stepped the whole problem. Not for nothing are they generally considered to be the smartest and highest paid workforce on the planet!
The extreme (upwards) moves in the indices spread betting markets is making rational decision taking very difficult. The 300pt increase by the Dow has reversed much of the previous four days of pain and we can now see Monday’s consolidation as potentially the base for the market.
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Indices Spread Betting Comment, 13 Nov 07
Late last night it was still looking a bit pear shaped but the overnight move in the US markets and rebound from the lows in the Far East have put a bit of sparkle into proceedings this morning.
The call on the FTSE spread betting market is for 20 points off but at the close last night we were staring down the barrel of a 60 point reversal. Oddly enough the closing quote at 21.00 yesterday was exactly the same as the opening one at 07.00 in the morning which has formed something of a possible candlestick 'gravestone doji' which some consider a signal of a trend reversal. There is something of a battle going on at these levels with 6300 being the level of the close of business on the first trading day of 2007. For all of the fire and brimestone of the last ten and a half months it has all added up to a plate of beans. Admittedly in between this number the advance of the 'physical' over the merely 'financial' has been the focus of the year to date. Mining and Manufacturing has done well and banking? As Sven Goran Erikson used to say, “err…not so good”. Metals are bouncing from the lows last night in the states which will help the miners this morning and the renewed focus on value may well bring in further buyers. Yields on many front line stocks look tempting but the problem will be whether these companies can sustain the dividend levels without impacting growth.
Indices Spread Betting Comment, 12 Nov 07
It was a bloodbath on Friday. Taking its lead from that the Far East put in one of the worst days of the year. It doesn’t bode well for a good opening this morning. Virtually every asset under the sun is being called heavily lower (even Gold!).
The FTSE is being called some 30 lower at 6274-6275 and some might consider this a result, if it happens, given the near 400 point fall in the Nikkei and the 1200 in the Hang Seng (both down over 3%). The Dow compounded a dismal week with a 200 plus drop on Friday and is trading a further 50 lower this morning. Alarmist headlines as to the possible dire situation that some banks might be in is not adding any positive vibes. Looking at the appalling share price moves of the big four in the UK over the past month alone, investors might be forgiven for thinking that Armageddon had happened and nobody noticed.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'Indices Broker' by DB, updated 23-Nov-07
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