Well probably our clients best ever day in the end. Clients sold into the rally all day and at six thirty were, frankly, all looking a bit sick. One hour later and you could almost hear the champagne corks popping across the country.
US investment banks came out with the 'startling' comment that possibly, given the global outlook, it might be prudent to take a few profits from the huge recent rally and await another opportunity to get long. The ensuing sell off was pretty brutal and left us bouncing (very neatly) off the 13945 support level. The trend is still very much to the upside but the volatility of yesterday will have shocked a few punters after a few weeks of quite calm trading.
The FTSE spread betting market is opening at around 6675-6676 off some 50 points neatly removing most of yesterdays rally. The effect of this is going to be difficult to assess in the long term as investors may not now be too keen on buying above the 6700 level if there is the fear of such a strong reaction. On the other hand dealers will be comforted that a 200 point reversal in the Dow has not seen a greater response from Europe.
With very little information out of UK corporate and no economic numbers until the US this afternoon the markets are likely to drift around the opening levels until some impetus can be found from the States. At 13.30 we have the Retail Sales numbers and at 15.00 the University of Michigan confidence figures. Both of these may give us a better indication as to how the recent financial turmoil has affected the 'man on the street'.
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Indices Spread Trading, 10 Oct 07
Amidst a raft of strange tax changes the oddest is the knee jerk reaction to an absolutely miniscule Private Equity loophole, this now means that there is no benefit whatsoever for holding onto stock for lengthy periods as the same flat rate at 18% CGT applies to a 15 minute day trader as to a 10 year investor. The Tax apparently does not come in for another 6 months so hold onto your hats as virtually the entire long term private equity holding in UK plc is bed and breakfasted. The immediate reaction would seem to be 'buy brokers' as the extra revenue over the next six months could be substantial. The case for closing husband and wife dual relief also appears odd in that if they get divorced the courts nowadays seem to assume that the other half put in equal 'effort' and is entitled to half the assets. Talk about getting hit 'coming and going'. I would guess that clever lawyers will now use the fact that if the revenue grasping arm of the government assumes no input then the divorce laws can hardly claim the opposite!
The markets are looking to open higher as the impact of lower corporation taxes (announced for the second time) and the rise in the US and Far Eastern markets impact prices. The FTSE spread betting market is at 6640-6641 but it has to be said that we are not being run over in the rush to buy. Dealers are selling just about every index in early action with heavy shorts being set up in both the FTSE and Dow as punters try to call the top. This is always a difficult action as traders should always wait for a trigger before selling but this final push in markets does seem to have brought out the bears. With the Dow at all time highs (again) weak shorts will be in the target sights of day traders if further upward momentum is seen.
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Indices Spread Trading, 8 Oct 07
Today looks like being one of the more boring at least to start with. The FTSE is unchanged and the Dax, S&P and Dow are just slightly off after the efforts on Friday. The week is quite light on data from the US until Thursday and Friday with the Chancellors pre budget speech to focus on tomorrow in the UK as well as a few indicators. For home audiences the important number will probably be the PPI today at 09.30 with Industrial and Manufacturing Production (no doubt someone will tell me what the difference is) to back it up.
The FTSE is opening at around 6592 which, as mentioned, is the closing level for Friday. Our punters do not seem to be too confident that current levels can be maintained if the positions that are being taken out are anything to go by. Sellers are out numbering buyers by 2 to 1 in early trading looking to take advantage of any vertigo that may be experienced at the current prices. For long term traders the question is going to be whether investors, with the world economy looking to be under growth pressure, will focus on existing returns in a falling rate environment or on the potential erosion in corporate income.
Indices Spread Trading, 5 Oct 07
Today sees the dreaded Non Farm Payrolls out of the states at 13.30 so everything written in this message may be complete rubbish by 13.31!!
The FTSE seems to have found some support up in the mid 6500's but as with the 6400's dealers seem cautious about trying for a new level. September was filled with attempts to get above 6500 and we may find that October is similarly stuffed with attempts to stay over 6575. This level was something of a support back in July before the sell off. A quick look at the daily chart for the FTSE shows how bullish the move since Mid August is becoming, each fall back is less effective that the previous one and each rally is getting to new highs. To an old participant like myself the move seems a bit too good to be true with 750 points being added since the lows but there is no denying that the valuations do back up the move. Corporate profitability is not yet showing signs of stress and at somewhere in the 12's the p/e ratings are hardly extreme. (also see how to spread bet on the FTSE).
The Hang Seng managed yet another 2% move last night as the index continues to be re-rated on the Chinese market model. I suppose if you are an investor in the Shanghai index and accustomed to trading in stock with p/e's with an average of 50 when inflation is at nearly 7%, the new found ability to trade in Hong Kong on stocks valued on much lower levels then the temptation must be very strong to just pile in. Traders should note that if this valuation model exports itself outside then equities could be in for a big ride (but don't hold your breath).
Early action has the FTSE at 6570-6571 up some 25 points after the US closed virtually unchanged after another attempt above 14000 failed in very short order. Having hit the new high on Monday (lest we forget this was the first trading day of the financial year for many institutions who report sep/sep) there has been little appetite for a repeat and we could be stuck around here for a while in the absense of anything dramatic to move us either way. Traders will be eyeing the 13875 support level if we approach this as a break below here may indicate a return to the 13250 to 13875 trading range.
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 Prices' by DB, updated 04-Feb-08
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Risk Warning: Spread betting carries a high level of risk to your capital and 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.
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