Indices Spread Betting June 2010
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A regular Indices spread trading update by Simon Denham of Capital Spreads. For the latest Indices spread trading update, click here.
Index Spread Betting, 4 Jun 2010
Equities have found some support around their lows as investors tentatively dip their toes back in the market.
Whilst the Dow is still below its 20 day moving average and has found a bit of resistance around the 10300 level, the European indices are leading the way higher.
In some circumstances they are not too far from their highs of April, with the German Dax a mere 3% away from its 2010 high, but the FTSE is still 10% away.
Despite the small gains of the morning there are plenty of warning signals out there. The recent gains have mainly come from more defensive stocks and this morning it’s a mixed bag with the riskier assets struggling to lead the way forward.
On top of this bond markets are still nervous with yield spreads widening and Libor rates are around levels similar to those of Lehman times.
There’s no question that investors are a little apprehensive this morning ahead of the day’s main event, the US Non-Farm payrolls, which is due at 13:30 London time.
Technical levels in the FTSE are resistance around the 5300 area to the upside and to the downside support is seen around 5090 then 4900.
For the Dax, which has been much stronger than other indices, immediate resistance is at 6125 and then 6180.
Index Spread Betting, 3 Jun 2010
The late recovery in stocks yesterday is encouraging for the bulls, although the most of the gains were down to defensive stocks and there were a few analyst upgrades for some of the drug makers, considered classic defensive plays.
This morning it’s the turn of the riskier assets to make their gains and we see the usual suspects leading the way with miners, banks and even energy stocks.
The FTSE is enjoying a good rally in early trade, firmly back above the 5200 level at 5230, and bulls will be hoping 5250 is taken out before a test of 5315. We’re also back above the 20 day moving average so a close above here will be encouraging and we could next test resistance around the 50 day moving average.
Index Spread Betting, 2 Jun 2010
Last night’s session for the Dow shows once again how susceptible the markets are to a quick reversal of fortunes.
In the last hour of trading US markets gave up their gains and suffered losses that completely eradicated what had looked like a rally from recent lows.
The aggressive sell off followed through to Asian trade overnight and the Europeans are suffering as a result too. The headlines have not been conducive of investing in shares over the last few days and traders are wary of the next possible leg down.
For now at least the 5000 area is propping up the FTSE and the same can be said for the Dow Jones which is finding support from the psychological 10000 level.
Earlier weakness seems to have subsided for now and if the bulls do get the upper hand we could see a retest of resistance around 5200 and even 5250 could be a possibility.
Such a move will bring us back over the 20 day moving average that has proved too much for the FTSE recently. However, a retest of this area and a few closes above might be enough to persuade investors that the market still offers value at these levels.
To the downside, the recent low around 4900 is key and a break below here could open up further losses to 4800.
Index Spread Betting, 1 Jun 2010
Just when equities looked to be staging a comeback another round of bad news flow hits the headlines and eradicates the gains of the last few days.
May was an ugly month for the markets, with shares hitting nine month lows and the Euro hitting a four year low, and it looks like June hasn’t started well either.
Yesterday’s quiet session in Europe, whilst the UK was closed for its bank holiday, saw a very quiet sideways move. However, yet again the news of BP’s failed attempt to stem the leak from its oil spill has hit their shares hard and had a corresponding negative effect on other energy stocks.
The FTSE has also been hit by the softening Chinese manufacturing data which, whilst it still came in with a figure above 50.0 suggesting expansion, fell much more than expected. This gave investors a bit of a shock and refuelled fears that the global economic recovery might be stalling.
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Index Spread Betting, 28 May 2010
So the markets turn around once more. What were we all worrying about?
Equities have rebounded strongly and look firm going into the end of the month as the news flow continues to be supportive.
Most Eurozone nations, and the UK, are expected to propose serious budget controlling agendas. While some may be quite concerned about the effects of all of this on future growth potential, the markets currently seem happy to give them the benefit of the doubt.
The FTSE is trading almost unchanged on yesterday’s close at 5200 having reached 5240 in overnight dealing. We are now back at the old trading range which dominated the end of 2009 between 5150 and 5400 but it must be noted that extreme conditions are hardly likely to just ‘disappear’.
The Dows huge rally from under 10000, rejecting the 9900 level with a vengeance, was welcomed by our spread trading clients who ran the market nearly the whole way higher but we are still well off on the month.
Customers have now almost totally exited indices positions and the long bank holiday weekend coming up will probably encourage a certain amount of inertia today.
Index Spread Betting, 27 May 2010
The FTSE is trading some 50 points higher having traded as low as 100 points off in the US session yesterday evening. We have rejected the 4950/5000 level once again and our spread trading clients have been rewarded, once again, in their confidence in buying the support.
Not only this but the rejection of the low levels have been quite violent on each occasion, going all the way back to October last year. As mentioned in a few recent comments it is quite difficult to be negative for equities on fundamental grounds as announcements/yields/growth/valuations etc all rather favour them.
Unfortunately these analyses are all being subsumed by the occasional brutal bout of nervousness.
Yesterday we commented on the fact that the Dow Jones had yet to actually close below 10000 even though it had traded considerably lower during various sessions. The close yesterday corrected this anomaly with a close at 9940 only for the Far East and Europeans to go bananas.
We are now at 10100 and the North Americans are still four hours from walking into their offices. US traders really hate their markets being moved around outside of their trading hours.
Index Spread Betting, 26 May 2010
Was yesterday the blow out move to the downside? The move, either up or down, that signals the end of the current trend.
This will be the question in quite a few traders minds this morning. As hinted at yesterday the US did not like the Asians and Europeans smashing ‘their’ market lower and spent the whole session carefully reversing the whole move.
As we stand this morning a Dow Jones trader, having missed yesterday’s session, would be forgiven for thinking that nothing much occurred yesterday. We are almost exactly at Monday’s close after having traded almost 300 points down at one stage.
For all of the time spent below the mark over the last week we have yet to actually close below 10000. Proving, once again, that big numbers have a talismatic significance way above their actual meaning.
Today sees the FTSE opening some 60 points higher following the big US rally last night and neatly wiping out most of yesterday’s falls. This said we are still only calling the market at 5005 which can hardly be considered ‘strong’. As mentioned previously investors, the long term ones who everyone likes to talk about, are not likely to be plunging into a market that is so unpredictable.
The Bigger boys do not try to ‘bottom pick’ they like to see evidence of a return to bull conditions before planting a flag in the sand. If this means that they miss out on the start of a reversal then so be it.
The 4950/5000 support was smashed about yesterday but now we are back above it again and so traders may be looking for some value once more.
This is, though, a dangerous game. It might be better to sit on the sidelines and await developments as there may be more bad news to come and, in our global market place, contagion is currently very high.
The bulls though do have good arguments in their favour from the fundamental viewpoints on return and value, unfortunately these are being swept away on the tide of uncertainty and fear.
Index Spread Betting, 25 May 2010
The FTSE has opened some 125 points lower, smashing strait through the support levels of 4950-5000. We had a couple of weak attempts at this level in the last week but this ‘blow through’ event is very surprising.
The move also briefly opened a ‘gap’ in the market versus the low last Friday at 4955 but the immediate response on the start of trading at eight this morning was to close this and then move lower. We can now say that, unfortunately, for the technical traders the way down looks easier than the way up.
On the plus side, the Americans are never happy at ‘darn foreigners’ moving their markets and with the Dow Jones now called some 200 points lower from yesterday’s close we can definitely call this ‘an out of hours move’. Historically US markets generally reverse outside moves.
Index Spread Betting, 24 May 2010
The FTSE is now unchanged at 5060 having reached 5110 early in the session and one fears that the pressures are all to the downside.
A classic scenario of recent times would be the Japanese markets of 1989 to 2010. Here overall good corporate numbers were never enough to get the economy out of its deflationary cycle as its banks were fatally weakened in the late eighties real estate debacle, remind you of something.
It is very difficult to be too pessimistic as the results of recent weeks from a wide range of corporates have been almost universally good. One feels that this should translate into higher valuations but the fact remains that they are not.
As mentioned last week I am a great believer in the truism that, in the markets, if something should happen but fails to then the opposite becomes most likely.
The FTSE still has good support between 4950 and 5000 and this was tested last week to no great effect. The index, since regaining the 5000 level has had a series of bear move attempts but they have all petered out at or around the support mentioned.
Traders will be eyeing this level very cautiously as a break and close below 4950 may well be taken very badly indeed.
Our spread for the Dow Jones actually managed to breach 10000 on Friday but never in actual NYSE exchange hours as US traders took the market immediately higher on the open.
Oddly enough the market traded down to almost exactly the same level as the ‘mad moments’ a few weeks ago when the Dow lost 1000 points in just a few minutes on the 6th May. The low on both days were within just 3 points of each other just north of 9900, this was also the support back in February.
In both the FTSE and the Dow we are now in the situation of either seeing a good buying level, at support, or just pausing for breath before the next move lower. Basically a tossing the coin moment. Investors can be forgiven for continuing to sit on their hands.
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Risk Warning: Spread betting and CFD trading carry a high level of risk to your capital and you may lose more than your initial investment. Spread betting and CFD trading 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 Spread Betting June 2010' by DB, updated 04-Jun-10
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