Spread Betting Week 53
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The regular Spread Trading Update from Simon Denham of Capital Spreads.
For today's update >> Spread Trading.
Spread Trading 2 Jan 2009
First report of 2009 and there is really very little to go on to indicate potential moves for the start of the year.
Strange moves overnight in the currency markets will not have pleased many as the Pound ‘took off’ in the first few hours of trading opening some 150 points to the good versus the dollar and 100 pips against the euro. In the next six hours of activity all of this gain had been given up and dealers coming in this morning will have found little change but an opportunity missed.
Today traders are pushing the markets up in the usual first day rally and the FTSE is grinding its way up. The view of the charts is that there is more pressure to the upside at the moment as shorts built up at around 4370 to 4400 get steadily squeezed out. There is a good chance (in the very illiquid markets today) of a series of slow steady moves higher culminating in a sharp move higher.
Crude Oil is reacting to the strange events on the 31st December where the price gyrated wildly in very illiquid activity. For Oil bulls the action was encouraging as it indicated that, in light activity, the pressure was upwards rather than down. This morning we are seeing a retracement of the move but only down to the mid $42 region rather than below $40.
Gold remains the big winner of 2008 but with other asset classes now showing very nice returns the prospects for further appreciation may run into redemptions as asset reallocation may gain pace. For all of the headlines Gold is not a huge market and any move away by major holders may develop into a heavy fall.
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Spread Trading 31 Dec 08
With the world turning towards a new year I find it difficult to come up with anything particularly startling to say.
As suspected the FTSE 100 seems to be going out on the up as books are squared up in very light trading. The banks continue to be the poor relations looking in the window at the banquet. Yesterdays move higher owed virtually its entire move to Mining, Telecoms and Oil companies.
This morning we are forecast to be coming in another 50 points higher after the US managed an evening move up and there is a certain amount of optimism around as we are now above the 4400 level which has proved to be a bit of a barrier since Oct (aside from the silly spike on the Barak election on the 4th November).
We failed to actually close above 4400 yesterday and there will be some anxiety throughout today’s session as to whether we can hold up here.
Retailers also had a reasonable session as investors try to see through the fog of conflicting data hitting the news wires. Huge numbers of shoppers appear to be out and about …but are they buying? Discounts seem to be offered in ever more strident terms but when I actually venture in they never seem to be on the merchandise that I want to buy! It is all very well stating that ‘up to 60% off’ is on offer but when this actually refers to woolly willy warmer, which had been marked up for the Christmas trade in the first place, somehow my enthusiasm begins to wane.
Sainsbury stock has been quietly rising over the past few months and there is a possibility that the supermarket might once again be in play early in the New Year. Since Mr Tchenguiz was forced out of his holding the stock has rallied some 30% and the virtual one way move since then would indicate some serious stake building going on.
Dividend yields on Supermarkets have never been great but with interest rates now plumbing the depths equities might very well be the place to be. If interest rates actually do hit 1% or lower the question might well be “for how long for?” Might we be in for a Japanese style ‘lost decade’ with ultra low rates for a substantial period. Make that almost two lost decades now. The huge debt issuance of the next few years might make this an implausible likelihood but not impossible. If this is the future then well covered shares may be a ‘safe’ haven.
The pound has yet again taken a hammering, hitting new lows yesterday versus both the Euro and the Dollar but seems to be pausing for breath for this morning at least.
I have commented so many times over the past year on the potential for weakness of the pound and whilst I am of course happy to be proved right this does not detract from the pain that this will inflict on the UK economy.
I would be surprised if we did not see some sort of reversal soon as markets tend not to be entirely one directional and the drive for 1 to 1 parity with the Euro might well be just such a point. If too many people get too certain of a move then the probability or the event happening actually gets ever more remote. The weight of money starts to tip in the opposite direction.
Crude Oil and Gold are retreating in early action but are just going over the same ground as yesterday. $40 looks to be number that we are going out on for Brent and $870 on Gold.
I might have believed the Gold number at the beginning of 2008 (we closed at $833 on 31 Dec 2007) but the Oil movements have certainly been a surprise. What is the betting we go straight back up to $100 next year?
Grimness seems to be the general outlook for next year if we are talking individual experiences but the omens are not so certain for the Equity markets. The real killer would be if deflation took hold and asset values (property, stock, plant etc) came in for serious downgrades once again. In this scenario equities (for all their good divvy returns) may well suffer but ‘fingers crossed’ this is unlikely in the long term.
A short comment for the last day of the year but may I wish all readers a Happy New Year.
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Spread Trading 30 Dec 08
Markets continue to wing all over the place with Gold, Oil and the currencies taking their turn over the Christmas period to add some spice into proceedings.
The FTSE remains in the 4210 to 4400 range mentioned a week or so ago and clients continue to make hay buying any dips and selling into the rallies. With the opening level expected to be around 4335 we are nicely towards the top and punters are duly selling into the move. This might prove to be a dangerous game just at the moment as the continued flow of bad news is not having the expected effect on markets. We may be just a fraction away from some small piece of brightness giving the market a big boost.
The continued weakness in the pound is also not having the expected effect. A huge preponderance of FTSE 100 business is actually non UK centric and as such profitability (in Sterling terms) should be reasonably well enhanced. If the pound remains at these lowly levels many quoted companies may well surprise to the upside on their numbers.
With the issues in Gaza adding to Oil fears there has been a mild rally over the last few days but it hardly adds up to much so far.
Our closing low for Brent so far has been $38.46 and we are opening this morning at $40.35-$40.40, not even $2 up. This could easily have been explained away by normal trading conditions, given recent daily gyrations, but the press seems to think that it might presage a return to bull oil markets if the Middle East producers get all lovey dovey over the Palestinians and start slashing production.
Unfortunately for the Palestinians the producers have their own economic concerns and anyway history does not suggest that anyone will help much. In reality if you cut production the people who really get harmed are the smaller nations with the least buying power not the ‘Good old US of A’. So there will no doubt be many high words and low threats but not one drop of oil is likely to be impeded.
Sterling continues to weaken this morning (or rather the Euro and Yen continue to strengthen). The momentum now appears to be so strong that no-one dares stand in the way.
Into this we may actually find that the BOE does what hasn’t been done in over 16 years and intervenes on the side of Sterling. A short sharp foray may well cause a nice little bounce which might give pause to Sterling sellers fearful of being caught the wrong way round over a Central Bank buying spree. The Euro rate is approaching parity at £0.9726-£0.9728 up another 30 pips overnight. We are seeing a little buying of the pound in recent sessions and it might take a bit of effort to make it through the last few cents to one to one.
The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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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.
Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Spread Betting Week 53' edited by SD, updated 04-Jan-09
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