The S&P is heavily down this morning after comments that major US investors may be deserting the dollar for healthier climes.
Not surprisingly the Europeans are also suffering slightly in the fallout as the FTSE which was called 50 higher at the 21.00 close last night is now trading 10 lower on the open. Punters are short of Europe and long of the US which on the face of it looks to be the wrong way round on the open. The willingness for markets to give up gains quite easily is beginning to worry some commentators, but in the main, the big analysts are still quite bullish for the remainder of the year.
We are now back at the 6500 level and if we hold below this level and fail to bounce then the charts would not look good for short term trading. The temptation for investors to walk away at the moment is getting stronger as not only the indices but individual stocks are exhibiting increasingly irrational behaviour. The FTSE is trading up or down a hundred points (frequently both in the same day) every day and some of the component stocks are trading 5% each session. Punters are keen to buy on the opening this morning which, if reflected across the market, should give some support at these prices.
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Indices Spread Trading, 23 Oct 07
Markets have now neatly reversed the falls of Monday and in some cases are significantly higher than the closing levels just before the weekend.
The Far Eastern markets recovered their poise after the nervy Monday session and funds continue to pile into Chinese, Hong Kong and Indian equities with the Hang Seng managing a 1000 (!!) point rally and the Bombay Sensex up almost 700. Both well over 3% up on the day.
The FTSE spread betting market is opening some 45 points to the good on the off at just over 6500 (6505-6506 as I write with Capital Spreads) and has bounced strongly off the support mentioned yesterday at 6400. As mentioned the 6400 and 6500 levels have proved to be both something of supports and resistances and punters who went home long last night have been taking profits on the open this morning. Yesterday started off on the bloody side for our clients but as the day wore on longs who held their nerve were rewarded. If we stay above 6500 for a while this morning there is a good possibility of buyers coming back again but punters are understandably twitchy about any direction just now.
The Americans did what they normally do when the Europeans make a big bear move on their markets, they traded in the other direction. US market do not mind going down but they always seem to hate it when the movement occurs outside of US trading times. If all a trader ever did was wait for the few times a year when the Dow was called more than 100 pips lower in UK morning sessions and then buy I feel that their win to loss ration would be very sweet indeed!! The US markets are called higher again this morning at 13593-13597 with Financial Spreads in the Dow and 1508.9-1509.3 for the S&P (above 1500 once more). With credit worries 'apparently' rising again, the equity markets might seem to be the second safest place to be (cash being number one!).
I say credit markets are 'apparently' being squeezed because the newspapers are full of it this morning. Unfortunately for all these column inches the Short Sterling and Euribor contracts do not bear this out as the front month December contract is pretty much where it has been for the last month. With the big US banks trying to set up this rinky dink vehicle for distressed debt we may be seeing some talking down of asset values so that they can be picked up at truly sparkling levels.
Indices Spread Trading, 22 Oct 07
Forgive me for being slightly smug but my comment on Friday morning wondering why the markets had not fallen that week on the frankly very grim US data was borne out by the trading activity. A fall of almost 400 points in the Dow is being followed up with an 80 plus point drop this morning as confidence drains away.
The curse of October seems to be striking again and investors can hardly claim they were not warned, coupled with the rather extreme recovery move after the August sell off punters have had an almost perfect trading environment.
The FTSE is being called to open over 100 points lower this morning at around 6420-2621 which is still pretty close to the end of September closing levels of 6466. The Dow and S&P are some 450 and 40 points respectively off the same days closing prices. The 6400 to 6500 range is very congested and, in what has been an exciting year to date, both levels have proved to be something of supports and resistances. With punters now trying to buy on the opening low quotes from 6414 upwards we may find that this view is taken by the main markets when they open at 08.00. Whilst the US economy is showing some strange dislocations (housing slowing/outflows of capital/weak currency against robust consumer/low unemployment/strong exports) the UK may find itself in a rather more difficult situation. The manufacturing sector has had a very good year to date but let us be honest and remember how small it is now is compared to the wider economy. A slow down in the financial sector will harm the UK more than any other major nation on earth and the continued gyrations (whilst good for creating interest for spread betting companies!) do not lend themselves to good long term advertisements.
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Indices Spread Trading, 19 Oct 07
So we go up so we go down.
Somehow the US markets yesterday managed to read a whole series of c**p data as not too bad. The Far East had no such reservations and decided that a significant slowdown in its major market was pretty bad and the Nikkei ignored the stability and dropped 200 odd points. Cue this morning and we are back down again in response to the overnight Nikkei markets, which moved in response to US data, which moved etc etc etc..
The FTSE was trading at around 6630 at the close last night as the US markets rallied but has opened around 15 lower on the off. With the spread betting market at 6595-6596 we are running into solid buying from clients as they are taking the (not unreasonable) view that for the last few weeks we have been trading in the reverse direction to the most recent move. At the moment this is paying dividends in both the indices (especially the Dow spread betting markets) and the major crosses. With most markets stuck in trading ranges dealers are taking short term pain in anticipation of longer term gain. We are now just below the 6605 level which is something of a trigger in either direction as we oscillate between 6594 and 6605 (five times so far this morning).
The US markets are not as sanguine as the FTSE at the moment. We have now (quietly) had five down days in a row although each day has had nice little bounces and falls. Dealers are wondering if the recent action is showing a market that is about to take a hit or whether we are just waiting for the next bullish impetus. The prospect of Fed rate cuts is bolstering valuations but investors should remember that the 2000 to 2003 bear market took place against weakening rate expectations.
Indices Spread Trading, 18 Oct 07
Yet another great day for clients as virtually every market moved in their favour. Longs in UK equity markets were matched with shorts in the US indices and the price moves after the Carlsberg, S&N announcement favoured both.
This morning the FTSE was called 20 higher but this early spurt has been given up as investors took a quick peek at 6700 and decided that it was a just a bit too rich for the moment. The chartists will be licking their lips if we drift lower from these levels today as this may indicate a strong rejection of the highs. With the market now at 6672-6673, unchanged on the day, there are a lot of reasons for sitting on your hands and awaiting events.
The Dow was almost a contra move day traders wet dream yesterday with the initial strong rally being heavily sold off then the sell off being reversed with a late rally to close unchanged on the day. Today dealers do not seem sure what to believe and our clients are hanging back with virtually no net outright position. Yesterday's candlestick day chart shows a very rare phenomenon for the Dow with a 'Long Legged Doji' indicating extreme indecision from investors. This could be a sign that the markets will continue to hover around these levels for some time. If you stand back a moment this is not surprising because whilst the corporate world appears solid with margins well under control and profit growth continuing there are significant signals on a macro economic scale that seem to be suggesting that there could be clouds on the horizon.
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Indices Spread Trading, 17 Oct 07
The Dow is now around 30 points above September's close but the FTSE is still 150 higher. If we believe in patterns then the next few weeks could be a bit fraught for the UK index.
The FTSE is spread trading at 6599-6600 having opened 30 points lower than pre-market estimates. The Spread Betting companies are usually quite good at calling opening levels but this morning it seems that there may have been some spoof being played with early pre-opening bids and offers being pulled at the last second. Yesterday was a truly dire trading day with the FTSE trading the same 15 to 20 point range no fewer than 17 times. A great market profile for our Capital Spreads day traders who like to bet on the ranges. Dealers, as mentioned, are buying this morning in the FTSE so obviously the anticipation is for a recovery of yesterdays losses.
Indices Spread Trading, 15 Oct 07
Markets this morning are very peaceful with all the indices within a handful of points from Fridays close and our clients seem to be in their usual split personality. We are seeing buying of individual stock bets but selling of the indices as a whole. This seems to be the case across the spectrum with German, French and US equity longs being matched by punters being short of the Dax, Cac, Dow and S&P.
The FTSE spread trading market is trading at 6749-6750 just a gnats breath off the trading day high for the year of 6754. It is understandable that punters would be selling at this level as a failure to beat the 18th June and 13th July highs could set us up for that dreaded market signal "the triple top". Just look at what happened on the "double top" formed by the aforementioned 13th July print, we then managed to drop 15% in the next four weeks! We need to close above these levels to break the resistance in the short term so bears should be wary of getting caught up the wrong way round in a major bull break out.
'Indices Software' by DB, updated 26-Oct-07
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