Spread Betting on Markets
|
|
|
A regular spread trading update by Simon Denham of Capital Spreads.
For the latest spread trading update from Simon Denham click here.
Spread Trading, 18 Jan 08
Markets look like bouncing yet again on the open as bargain hunters attempt to find the bottom.
Last night, with the Dow closing over 300 points lower, the call was for the FTSE to open this morning at around 5820 (another 80 points off Thursday’s close). Cue this morning and Far East dealers have obviously decided that the Americans and Europeans were getting a bit too carried away with the bearishness of it all. It is not often that you will see a plus 2.5% fall in the S&P and Dow and then watch the Nikkei and Hang Seng actually close up on the session. We have been steadily increasing our opening FTSE spread in the pre-market session and we now expect it to open at around 5890 just 10 off overnight.
As mentioned in the past two comments there is some strong buying interest from our clients in the mid to low 5900’s and whilst there is a certain amount of pain being felt at the moment the optimists are still out there picking up stock at very nice yields. If you believe in the sentiment that Central Banks will be cutting rates quite aggressively in the near future then the attraction looks even better.
Unfortunately the fact that stocks look cheap does not get away from the fact that the big boys are sitting on their hands at the moment and in the absence of serious buying volume the market is still vulnerable to further bearish momentum. Analysts like to say that a fall of 20% in stocks is the signal for a ‘bear’ market, I have to assume that somebody has made a study of this fact as it seems rather a pat kind of statistic. But on this basis we would have to hit 5410 in the FTSE. Another 500 points lower. So we have been warned.
American markets are reacting to the buying and the Dow is spread trading over 100 points up on the 21.00 close last night which may annoy the US traders a tad.
After the dire US statistics out yesterday it is rather nice to be able to say that today is rather lighter on numbers with only the Retail Sales numbers out of the UK at 09.30 (pretty much done to death with the various major retailers having already released trading data) and the Leading Indicators out of the States at 15.00.
FX markets remain peaceful with the Dollar and Pound continuing to recoup some of the recent losses. The Sterling/Yen cross is now hovering just below the 211.90 support/resistance at a spread of 211.16-211.24 having held well at 207.00 a few days ago. The volume support between 205.40 and 208.10 remains the biggest block to further weakness but the charts remain definitely on the sell side. The Japanese economy looks to be slipping into reverse once more which will do nothing to help the huge Government deficits but at least the country has a very healthy Trade surplus. With Yen five year money now below 1% once more it is very tempting for the Carry trade enthusiasts to get involved on a long term punt but we will probably need some signal that the Yens recent strength is abating before this becomes more of an influence on markets.
I do love the articles propounding the underlying value of Gold as against currency (printed money). In reality Gold is a dead hand. Whilst the price has been going up sharply in the past couple of years, by any long term valuation a pension fund investing in the Yellow Metal would be doing pretty badly. You cannot eat it, burn it, it costs you money to hold and gives next to no return. Its only value is in its rarity, the perceived attractiveness as Jewellery (although many consider it rather gaudy) and its macho appeal when held in vaults. There are very few investments for which the price has to go up for you to make a return and when everyone is calling for a rally it is often the moment that the wise money is just getting out. Remember, with interest rates at 5.5% in the UK, Gold must end the year at $950 (if you start from 900 today) for you to have matched just bunging the money in the bank. It is a good ‘benchmark of last resort’ for Central Banks to hold in reserve but for the average investor looking for long term returns……..mmmm?
Gold continues to slide slowly as the Dollar stabilises and the Gold Spread is now down at $876.5-$877.0 some $40 from the highs of earlier in the week. As mentioned yesterday the rally has been so strong that the trend and momentum indicators could tolerate some very sharp downward price shifts and still remain Bullish. Medium term support can get down to $815 before breaking and Long term support remains all the way down to the low 700’s. Clients continue to buy on any weakness and we are seeing a steady trickle of purchases this morning.
Crude Oil is likewise weaker (although up a tad this morning) as the lack of any actual bad news weighs on the long positions. We seem to have found some support at $88.30 in the Brent Crude Oil March contract but if this goes traders will be eying the crucial $86.30 level which held once in November and twice in December. To the upside the obvious target remains $100 but the March contract high is actually just around $98 and there is growing resistance to moves above $90.70.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 17 Jan 08
A curious statistic, that winged across the wires yesterday, leaving hardly a ripple.
There are now more people in employment in the UK that at any time in its history. At least this number should be reasonably accurate, as even our bean counters ought to be able to add up all those paying tax! And it says something rather remarkable. Whilst we all whinge away about the state of this and the condition of that, quietly, the general population is just getting on and doing its best to earn a crust. Of course these numbers are slightly distorted by the huge influx of hard working Eastern Continentals who actually seem to be the ones getting the jobs leaving the poorly educated and inert indigenous inhabitant sitting idly by.
In times of plenty (especially when we have so many people contributing to the exchequer) you would expect the government coffers to be overflowing in abundance. Yet after (apparently) 15 years of steady growth our country is effectively bankrupt (even with some of the highest tax takes in the developed world) with the biggest budget deficit ever recorded. And this does not include all the hidden away PPP costs and the massive public sector pensions liability.
The state of the country’s bank balance has been here before in the time of the ‘Maggie’ but at that point we were in a full blown recession and the government was spending to get us out of it. If the economy does slow now we can expect some very serious belt tightening this time round.
Moving on...
What can we expect in trading today? Yesterday saw some wild swings as the FTSE fell 100 points rallied (briefly into positive territory) before dumping off again to close over 80 off. This morning in pre-market activity the buyers are out in force as the Far East managed a good performance. Samsung was upgraded by Merrills and other analysts commented that recent housing weakness was overdone leading to a boost in the property sector. The FTSE 100 spread is called some 50 points up at 5992-5993 and it seems that the Capital Spreads Account holders who have been suffering in recent days (buying against the flow) will have some relief. As mentioned yesterday there is some support around the mid 5900’s to 6020 and although we printed lower during the trading session bulls will be hoping that sellers are wary of getting short in such dangerous territory. We will probably need some new factor to appear for the market to get below 5900 and stay there. Whilst the inflation numbers were not good, much of it is made up of ‘one off’ items which will drop out without the MPC doing anything.
In the currency trading world the pound actually managed a bounce and rather nicely backed up my reading of the heavy volume support between 205.40 and 208.10. Although we did get as low as 207.00 the effort, this time at least, proved too much and we have now bounced back up to see a GBP / YEN spread of 210.90-210.98. We have had a couple of tries in the last few days to get above 212 which have failed both times and it looks like we could be stuck in the 208 to 212 (ish) range for the time being.
Cable has meandered around the $1.96 level for the last few days but this has been a result as the dollar finally managed something of a recovery versus the Euro yesterday meaning that the pound/euro cross fell below 0.75 once more. There seems to be some resistance to selling the pound below $1.9550 (and admittedly buying it above $1.9750) so punters will probably be trying to play the ranges this morning in an effort to take a few pips off the market.
The Euro managed to fall from over 1.4850 to 1.4600 yesterday (in just a 30 minute blast) vs the dollar which probably caught quite a few speculative longs on the hop! This kind of price reaction tends to put a brake on trends as traders become wary of pushing too far in fear of being caught the wrong way round again.
Today everything appears quiet and will probably remain so until more US data this afternoon on Housing Starts, Oil Inventories and the curiously named Philly Fed Index (which measures confidence).
Gold fell again yesterday and this morning the gold spread betting market is called 2 bucks lower at $883.0-$883.5. With so many buying opportunities now available the value of Gold as a hedge may be waning slightly but if the markets slip again do not be caught short.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 16 Jan 08
As mentioned yesterday the Northern Rock saga seems to be slowly grinding to a halt. 'Our Gordon' indicated last night that the government might take it into national ownership and sell it off at a later date. To forestall protracted legal arguments the necessary legislation might very well agree to actually buy the bank at a market price as the company is, operationally, profitable. Given that the Bank of England can continue to lend the shortfall in funding for a nice little turn it is difficult to argue that the company is worthless. Anybody with deep enough pockets would be picking the company up for a steal at the current market valuation.
I see from the headlines that this Government seems to be reverting to type over the treatment of fee paying schools. When times get tough "lets put a bit of trendy legislation through attacking those nasty ‘rich’ people" in a desperate attempt to divert attention away from the state of the economy. The definition of ‘Charity’ used to be ‘for the public good’. It would be difficult to find a better description of that than educating a seriously large section of the ‘public’ (even if you are Middle Class you are still part of the Public) to a much higher level then the average at absolutely no cost to the Exchequer and with money that has already been taxed at 40%. The definition of ‘Charity’ (where Public Schools are concerned) now appears to exclusively mean ‘benefiting those in poverty’ which, were it applied universally, would put virtually every charity in existence in a bit of a quandary. The problem with this type of legislation is that it is almost impossible to defend against because it will always be the majority ganging up on the few especially when the few are perceived as the privileged minority. The UK establishment seems to be doing its normal reaction to success which is not to lambaste the failures but to drag down the achievers.
So moving on...
Oh Dear, when I commented yesterday that it was 'difficult to be positive' on the FTSE I was not expecting quite such a reaction. 160 points off on the day. After the Far East decided to join in the rout this morning, the call is for a further 35 points off the FTSE 100 spread at 5990-5991. Support levels between 6010 and 6030 held yesterday but on pre-open trading it looks like we are going to fall straight through here. We can expect some initial ‘bottom picking’ from traders as some stocks continue to look seriously cheap but the current momentum remains to the down side (stating the obvious I know). 6000 may well prove to be a psychological price which attracts buyers but it actually does not equate to any yield level or trend support. Four of the last five sharp falls have held firm between 5970 and 6020 and it will probably be this fact more than any other that will give any buyers confidence.
Today we have the Chancellors 'pre-budget' speech at 10.30 which should be good for a laugh and this afternoon a whole raft of US data giving CPI at 13.30 and Capacity Utilisation and Industrial Production numbers at 14.15.
What can you say about sterling? Yesterday the Europeans decided on some short covering and even a bit of outright buying which took Cable trading (GBP / USD) up to $1.9740 by late afternoon. Unfortunately the rest of the world was yet again in sharp disagreement and in late US trading the currency cross was pushed all the way back to below $1.96. Compounding this was the fact that the dollar itself weakened sharply against the Yen and Swiss franc.
Sterling/Yen is now down at 208.28-208.36 as support level after support level gives way. There is some volume support between 205.40 and 208.10 which may prove difficult to break through. However, the negative trend is now well set and as mentioned just a few days ago the bears will be looking for much lower levels than these.
Gold has shifted below $900 and as mentioned the more aggressive Capital Spreads Accounts sold out above $900 and have been proved right once again. The Gold spread is now at $884.5-$885.0 for spot Gold. It could actually fall all the way to $825 and still retain the medium term bullish trend and can get all the way to $720 before attacking the long term support. Remember in 2006 the price fell from $730 to $550. That said the trend is still to the upside so punters are still overall buyers on any weakness.
Spread Trading, 15 Jan 08
"Come what may. It’s the poor wot pay"
With essential spending inflation now at the top end of expectations as commodities and currency factors combine to force producer and retail prices higher, we can step back and look at the store's results in a slightly different light.
Retailers with a middle class or affluent youth clientele seem to have done very nicely (or at least not too badly) over the past quarter. However those who peddle in the lower income sector are being mercilessly squeezed. For all of the squeals from the middle classes in the past few years as tax increases seem to have been selectively imposed purely on them it is actually the poorer sections of society that are struggling the most with the current (rather focused) inflation problems.
With more and more income being tied up in just buying food, heating and petrol the low income retail sector is being hammered. This phenomenon is unlikely to abate in the short term and it can be seen that stores such as JJB Sports and Woolworths continue to plumb the depths. With the government finally taking a line on Public sector pay, salaries are likely to fall in real terms this year making for some difficult times ahead.
Punters have been conscious of this effect for a while and we have seen heavy selling in many frontline store shares. Mike Ashley’s defiant purchases of Sports Direct stock in recent weeks may yet come back to haunt him. As the 'once off' inflation impacts come out of the numbers later in the year there may be a good argument for some selective punts but for now the sector is not exactly attractive.
The Northern Rock saga looks to be entering the final straight and from here on in we can expect only the lawyers to make any money. Costs of nationalising the company seem to be plucked out of the air by Politicians trying to score points. The fact is that if the company is taken over by the government and run slowly into the ground as mortgages amortise over time (and as each mortgage comes up for renewal all the administrators need to do is offer slightly worse terms than competitors for borrowers to move to another lender) then the process will be quite ‘simple’. In short order the total exposure would shrink away and the government may even make a profit out of it. Unfortunate for the employees, but companies have gone under in the past and will do so in the future. Northern Rock may yet go down in history as the only bank to have gone bust whilst actually being profitable. What would be an absolute disaster would be if the company was allowed to continue to offer mortgages and generally trade in the open market therefore setting up a Government institution in competition with quoted companies. As the credit crunch abates the administrators may even find a more willing buyer of the ‘dead mortgage’ book at a more reasonable market valuation.
Today we see the markets looking to come in slightly weaker as Europe ignores the rally in the States. The FTSE 100 spread is called some 20 points off at 6194-6195 and it is getting difficult to be positive. Virtually everything (apart from the actual underlying economy) is moving in favour of UK equities with better yields, lower rates, weaker currency etc.etc. With the senior index taking so much of its revenue internationally all these factors should be working in its favour. But of course sentiment, fears over future growth, inflation spooks and banking woes are all combining to keep investors sitting tight.
A huge swathe of second line stocks are giving trading statements today and it is difficult to pick one out from another. And it is likely that punters will be focusing on the CPI and RPI both out at 09.30 this morning (watch for fireworks).
On the FX front the pound continues to weaken in almost one way traffic. At some point the elastic band will decide that the Euro has gone too far and will snap back to some extent but at the moment the poor old pound appears to have few friends. As mentioned yesterday the GBP / JPY was approaching the 211.80 support level and the fear of even further falls if the level was breached. Today we are now down at 210.20-210.28 with many ‘carry trade’ longs now massively underwater. The fall against the Euro is even more spectacular as it did not start from a position of weakness (as the yen did) in the first place.
The Euro Sterling cross is now hovering at the 0.76 level (where there does seem to be some selling pressure at last) with the spread at £0.7588 - £0.7590. The Financial Spreads punters have been short of pounds for some time now but are now taking a few profits and lightening their positions.
Gold hit new highs yesterday up at $918 before profit taking and sheer tiredness caused a bit of a pull back to the $900 level in the afternoon and evening. Continued dollar weakness has brought a few buyers out again this morning but it does, for once, appear half hearted. The Capital Spreads Account Holders are still very long but some of the more aggressive buyers have pocketed their bets and are now sitting out on the sidelines.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 14 Jan 08
So, the US Sub Prime seems to be coming back to bite us once more. After huge, world wide, write downs in November and December, Merrill’s have now come out with a possible $10bn further hole in the accounts. Sometimes the scale of the losses is difficult to comprehend. The US housing market is falling sharply but presumably the Banks do have the collateral of the actual property to fall back on and this is after years of sharply rising values. Only a small percentage of the last few years of lending should be in trouble from a valuation point of view, previous lending should still be covered.
The problem seems to have been exacerbated by the packaging up of various separate pieces of each mortgage exposure to be sold on as a type of sliding scale of credit risk. The most vulnerable, and therefore generally highest return, is the actual interest payment segment of a mortgage and it is this bit that the banks seem to have been singularly unsuccessful in selling off to ‘less’ alert investors. This is odd because normally the ‘dodgiest’ stuff is normally sold off to investment funds, pensions etc. etc. (remember Orange County back in the Michael Milken days)
Into this ‘toxic cocktail’ must now be added the start of the US reporting season. The initial analyst’s comments make for grim reading as expectations seem to be at rock bottom. I am not sure that the actual results for Q4 2007 will be as poor as some are saying (although the Auto Industry may be a difficult place to be). What will be interesting is the ‘current trading environment’ statements that the CEO/CFO’s make. These may well read like a Fairy Tale, “Grimm”.
The fall out late on Friday in the US markets will no doubt find an echo this morning in Europe with the FTSE 100 spread being called 20 lower at 6179-6180 in pre-market activity but this is actually rather a result as at one point on Friday evening we were calling the quote a further 30 lower.
This morning has already seen one of those (admittedly rarer and rarer) ‘fat finger errors’ that make our life so interesting. At 07.01 to 07.02 the S&P futures spread dropped 50 points (500 Dow equivalent points) after somebody obviously put the wrong ‘big figure’ on a major market order. This has caused a certain amount of friction with clients being stopped out on somebody else's mistake but unfortunately that is sometimes the market risk.
Balfour Beatty have reported at the top of expectations as the ‘infrastructure’ spending continues unabated. The company has a continuing ability to win important international contracts and the general slowdown of construction spending seems not to be affecting business. The stock is a stand out in the building / construction sector having virtually ignored all the tribulations of the last six months.
AGA food services, which split off its catering unit in late 2007 have suffered in the slowdown of consumer spending. Given that the attack of the Bank of England interest rate policy is on discretionary spending you can hardly come across a company whose products are more discretionary than an AGA or Rayburn. The stock is likely to weaken on the open this morning.
On the FX front the pound has found some strength from the woes in the US but this is merely relative as the Euro and Yen have strengthened even more. The pound is now yet again at an all time low versus the Euro at 0.7571-0.7573 and against the Yen is pushing at the old two year resistance level at 211.90 with the current GBP / Yen cross spread at 212.33-212.41. If we close under here it may open the market up for a move down (in the medium term) to the 186.50, the old support level from 2004/05.
With the dollar weaker this morning, Gold is (naturally) significantly higher in early action with the market trading well through $900 at 905.6-906.1. As mentioned many times in my morning comment it is very difficult to oppose the current moves. Every indicator you can think of is bullish and, no matter what my personal opinion of the value of an inert yellow lump of metal, it’s rarely wise to stand in the way of a rolling locomotive.
As mentioned last week, Crude Oil Spread Betting is struggling at the top end of the range as supply continues at the higher end and political friction seems somehow to be not as bad as feared. This morning Brent Crude is called a few cents higher at $91.30-$91.35 and we are now some $8 off the highs of the New Year. Will this be a year of falling gas prices? We must now watch for a series of supports at $89.30, $87.20 and $86.40. If we break these and close lower then the oil bears may finally have something to get their teeth into. The bulls however will be hoping for:
a) some US/Iran dispute, and/or
b) a renewed problem in Nigeria, and/or
c) a renewed problem in Pakistan, and/or
d) some sign that the world economy is not indicating a slowdown.
So the usual then.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 11 Jan 08
So the BOE stuck to its economists roots and held interest rates for another month. It will be interesting to see how close the vote was. As mentioned yesterday I am very dubious about the benefits of high rates to fight imported or structural inflation. The idea is that you restrict the spending power of consumers on discretionary items (rather than essential spending) and promote saving. Mmmmm.... I would agree if it was the discretionary items which were the inflationary ones. Unfortunately this is not the case. Current inflationary pressure is being created by Food, Energy, Transport, Taxes and Government Spending none of which will be affected by what little old Britain decides to put its rates at. White Goods, Clothing etc etc are still experiencing deflationary pressure.
I feel that property should never be included in the inflation index as houses are assets, you might as well put the stock market in the CPI. The argument that the UK population is a low saving nation is laughable. We are one of the highest property owning nations in the world. At current valuations the average property is in the mid £200K region. Which, on an actuarial curve of life expectancy, is worth some £20 to 25K of pension income after retirement. If you take house purchases as a form of saving, higher rates are actually a drain rather than an inducement to save. We have listened to economists spout the benefits of high rates to combat inflation for so long that we now take it as read. It is easy to forget that Europe has had rates some 2% lower than us for the last ten years even though our inflation rates have been similar for that whole period. No wonder manufacturing investment tends to go elsewhere, we have no special expertise over anyone else but the setup costs are immediately higher than our competitors.
Anyway, FTSE 100 trading is opening slightly higher this morning being called up 10 at 6231-6232 which is rather a disappointment as the rally in the US overnight had us quoting it at 6290 at one point last night. The failure of the Far East to join in the fun has put something of a dampener on proceedings this morning. As mentioned over the last few days there is a certain amount of volume support in the mid to low 6200’s which has in the past caused some solid buying to materialise. At the moment though the market keeps returning to the bottom of the support range and this may be an indication that there is a certain tiredness setting in. With all the bad news circulating it is very easy to find reasons to sit on your hands rather than leap in and possibly drown.
It was pleasing to see that the Dow bounced off almost exactly the same low on Wednesday as the one set in the fallout last August. Markets spent much of yesterday morning trading below the 12700 level before the Americans came in and pushed the market higher. Today (unfortunately) the index is trading some 100 or so points off the close and is now called at 12738-12742.
Not much on the corporate front but Bovis have given an indication of the scale of the housing slowdown by announcing a drop of 19% in forward sales. They rather quirkily emphasised that ‘legal’ completions fell by 193 units in 2007 which rather begs the question as to how the ‘illegal’ ones are doing.
The pound recovered yesterday on the lack of rate cut to close up at 1.9630 having bounced very nicely off the support level mentioned yesterday at 1.9550, unfortunately the Far East was having none of it and in a rare 'outside of European time zone' move have smashed Sterling down to $1.9512-15 vs the dollar (a nine month low) 212.55-212.63 vs the yen (an 18 month low) and 1.3200-1.3204 vs the Euro (an all time low). Put that in your inflation pipe and smoke it! Retailers will be hammered on all fronts, falling customer spending power, rising energy and business rates and squeezed margins from imports. FX trading volumes remain very high but unfortunately much of it seems to be sterling bearish and the worse it gets the more negative become the analysts targets.
As mentioned yesterday, Gold took the marginal weakness in the morning as another buying opportunity and ended the day up another ten bucks at $895, a new all time high. This morning we are slightly off with the Gold spread at $893.0-$893.5 but sellers are few and far between. $900 beckons and then the Eldorado of $1000, who are we to stand in the way of destiny.
Crude Oil weakened again as supply problems appear to be fading slightly. China’s slight fall in trade surplus may be taken as a slowdown indication which could make for a reassessment of price expectations. But if the fall in the Chinese surplus is due to increasing domestic consumption rates the opposite may be the case. The February Brent Crude Oil spread is at $92.78-$92.83 up 60 cents overnight.
Spread Trading, 10 Jan 08
Well it's base rate day and with both 'Our Gordon' and 'Captain Darling' indicating that they expect a cut it will be a brave MPC that does not fall into line. Especially when the Gvn'r is up for a Job Interview with the desperate duo in the very near future (did I hear somebody murmur the word independent).
The Short Sterling rates indicate three month money in March at around 5.4% so with the remains of the Credit Squeeze still hanging around we can see that the markets are expecting one (if not two) quarter point cuts before then.
In truth, not withstanding my previous comments, I believe UK rates should be substantially lower anyway. I am not a great believer in fighting imported and currency influenced inflation trends with Interest Rates. What on earth difference is the British base rate going to make to the price of global oil and raw commodity prices? And if you need to prop up your currency with high rates in the end you are cutting off your nose to spite your face. But my big argument against higher base rates is that they trigger wage expectations. If base rates are at 5.5% employees want pay rises to match.
Well yesterday was a bit of a humdinger. As feared consistently in my commentary Marks and Spencer has flattered to deceive. Given that 'Sir' Stuart Rose took over a company hanging on the ropes, at the bottom of the market cycle in 2003 we now have the rather odd scenario that in four years of huge and, at times, almost sycophantic free publicity, a massive ad campaign and consistent analyst approval the company is now worth £2b less than Phillip Green offered for it back then, just as the architect of all this is awarded the country's highest honour.
Today we have Sainsburys, Halfords, John Davis Group, Premier Foods and Signet Group all making trading statements. Given the massive over selling yesterday we can expect some relief as it will be unlikely that any of them will report worse numbers than the shares have already discounted.
This morning sees the markets called higher after the US made an almost mirror reaction move in late trade to Tuesday's action. On Tuesday with almost no news the Dow suddenly dropped 250 points from seven in the evening to the close at nine and yesterday the index did precisely the opposite at exactly the same time. The Dow index actually managed to close above the 12700 support/resistance level. At one point last night the FTSE Spread was being called to open this morning at 6229-6230 but now we are talking about 6299-6300 some 30 up from the close.
The major UK index is building some support in the mid 6200's (from 6230 to 6250) as each time we approach this level investors reject it quite solidly but it would be a brave punter who tried to seriously pick a bottom in the current environment.
Sterling returned to its lows (and more) yesterday as the prospect of lower rates, massive public and trade deficits and a slowing economy continue to weigh on its prospects. Against the dollar we are now down at the support level mentioned in yesterdays comment at $1.9550 having bounced, weakly, off it late yesterday afternoon. If we trade through here the bears will really get a 'bit of a horn on' as technically there is not much between here and the mid $1.80's (and with the BOE decision and the Trade deficit numbers out today who would bet against it?). On the Bull front the market has stopped at the support and history has shown that Cable makes a habit of playing the levels.
As I happen to be in France at the moment the fall of the pound versus the Euro in the last month makes for rather wince making reactions, on my part, to my wife's frequent shopping excursions. The current cross is at 1.3320-1.3323 a new all time low which means that everything is some 10% more expensive than last summer.
On the commodity front Gold, Silver and Oil all had a bit of a down day yesterday as the Dollar recovered slightly. Gold is weaker again down 5 bucks at $873.7-$874.2 this morning but this is probably just a bit of profit taking after we hit $892 in early action yesterday. Much as I am dubious about the value of the yellow metal from an absolute point of view the trends cannot be ignored and until the upward momentum is broken it is a fool who swims against the tide.
Oil had a dramatic day yesterday as prices drifted lower only to run into weaker than expected US inventory number which caused a two dollar spike up to the resistance at $97.85 (February Nymex) only for this to hold steady and the sellers to take hold again and force the price down to close near the lows of the day again at $95.60-$95.66. This morning there is little change with the Brent Crude Oil spread off 20 cents at $94.22-$94.27 and we continue to be buffeted by non-financial events.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 9 Jan 08
Ouch, the hopes for a base building exercise seem to have been well and truly blown out of the water after the US turned around in late trading to put in the worst trading day of the year to date. So far the Dow has, in five trading days, had a heavy fall, followed by unchanged, a heavy fall, unchanged and finally heavy fall once more. The market closed at below 12600 which means that it blew straight through the key 12700 support level on a day in which there was almost no new information. Traders will probably try to regain the level in early action today as markets are called slightly better on the open this morning.
As if to emphasize the dislocation of the East from the West, the Asian markets not only failed to follow the US down the drain but some actually managed a respectable gain. The Hang Seng put on more than 300 points in a generally bullish move and even the Nikkei 225 managed to rally 70 points having lost almost 1200 points since Christmas eve. The Japanese Nikkei Index of top 225 stocks is still at lows for a year and fears over growth continue to swirl. The recent strength in the Yen will not have helped the economic cause either as the carry trade has unwound so the virtually 20 year recession seems to be set to run and run. For those who believe that salaries should always go higher a swift glance at the land of the rising sun would be an eye opener. With almost endemic disinflation wages have fallen almost every year for a decade!
The FTSE 100 closed slightly higher yesterday but is now called some 50 off in early trading with the pre market call at around 6300. This is rather better than the situation at nine last night when the call was for a further 30 points to the down side. The key to this morning will probably be the Marks and Spencer numbers due out early on. Last week analysts were calling for like for like sales of plus 2% but for some reason this bullish view seems to have drained away in the last five trading sessions and now investors are anxiously looking at the newswires hoping for a ray of sunshine to put a gleam on the fading petals of Mr Rose.
Michael Page gave good numbers yesterday which (aside from banking) seem to indicate that there is nothing much wrong in the employment garden. The Stock rallied a little but only a small drop in the ocean of the last six months demise. On the numbers the stock looks unbelievably cheap but unfortunately for holders the shares are trading on poor economic sentiment at the moment.
Yesterday Alistair Darling showed, yet again, why he is a perfect man for the job of Chancellor of the Exchequer (if your name happens to be Gordon Brown). His grasp of what motivates businesses, why prices move, what constitutes financial bank risk etc etc could probably be summed up on the back of a stamp. From the point of view of a weak Prime Minister, it seems guaranteed to ensure no possible challenge from one quarter at least. Mind you it is difficult to name a single Cabinet member these days. So being of minor talent and even lower profile seems to be a positive boon in the Labour Party at the moment.
Having started half of the last years news bulletins with the rising price of oil the media (the BBC) have got themselves into a real lather about the fact that energy bills will be going up rather a lot this time round. Ummmm smell the roses guys...If an Energy company has to fork out almost double last years spondulicks for the same amount of raw material then as sure as eggs is eggs somebody has to pay more.
FX markets look to be moribund once more with an attempt by the pound to move higher versus the dollar yesterday failing bang on the resistance of 1.9830 mentioned in yesterdays comment. The ensuing fall out from this move has taken us down to $1.9700 this morning with the early USD GBP forex spread at $1.9695-$1.9698. Support is at $1.9670 to $1.9650 which if broken would give bears hopes for a further move down to the major support around $1.9550. At the moment most long term commentators are looking for a slip all the way into the mid $1.80’s.
The Dollar/Yen market had another look at the top of the trading range at 109.75 this morning but is now drifting away at 109.57-109.59, still well up from yesterdays closing levels.
On the commodities what can we say? Gold took out all resistance levels to surge to a new all time high and is up another couple of bucks this morning with the gold spread at $884.7-$885.2. The Capital Spreads Accounts have truly had an amazing time in the yellow metal. They have consistently been maximum long for the last two years and are still buying into any weakness.
Oil has regained some of the losses of the last few days as tension again rises in the Middle East with Iran, obviously needing to sell off a bit more forward production, causing a bit of a military confrontation with the US Navy (or am I being a bit too cynical?). The Brent Crude Oil spread is now at $95.84-$95.89 up 30 cents over night. Today sees the US inventories numbers so punters will probably be quiet until this is released at 15.30
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 8 Jan 08
Having spoken volubly about the extreme volatility of the first week of the year in yesterday’s comment, the markets then had the bad manners to actually close virtually unchanged across the board.
From indices to commodities, whilst there was a certain amount of bouncing about during the day, the final result could be summed up as a plate of beans.
Rather encouragingly for this blog the only standout mover was Crude Oil which reacted to my rather pessimistic view by falling another 250 cents and Barclays again supported my decision not to get involved, just yet, no matter how tempting the yield by falling another 16p to a new 52 week low.
Today sees the markets in a slightly bullish mode with the FTSE spread called up about 15 points at 6349-6350 which leaves us oscillating around the support level mentioned yesterday at 6340 to 6350. The index spent much of yesterday trying to get above 6375 but eventually called it a day in the afternoon and drifted lower towards the close.
The Dow Jones bounced around about 4 times in a 150 point range between 12880 and 12730 before closing rather disappointingly at around 12830. As mentioned yesterday, 12700 is quite a crucial level and in the light of so little economic data it was unlikely that such a major level would be broken. Today sees a similar lack of major official data and so we could, in theory have another quiet time of it.
On the corporate side the recruitment consultants Michael Page (MPI) give a trading update this morning. The company has consistently matched (and beaten) targets and yet the shares are now almost 60% off the highs of six months ago as investor worry about the prospects of the job markets. Yesterday saw the stock close 3p lower at 248p but this was actually an achievement as at one point we saw trading at 238p as punters worried about today’s release. The prospects for this company could truly be said to be barometer for the UK and US economy and so may be watched more closely than companies of much bigger value.
On the FX front the crosses are quite peaceful having tested both the bull and bear directions yesterday.
The yen continues to give up a little of its recent gains but it is difficult to see whether this is the end of the recent bull run just yet. The USD Yen spread is opening at around 109.28-109.30 with us well away from the low of Friday of 107.95. However the move higher appears to have run out of steam around the 109.60 level and so punters have started to come in on the sell side once more. Support is at 109.10 then 108.40 and the real biggy at around 107.35.
Sterling is recovering a bit in early action with markets trading at $1.9768-$1.9771 as Far East buying pulls the pound higher. We may see an attempt to get above $1.98 in early European action but there is solid resistance between $1.9780 and $1.9830.
Gold is reacting to the minor dollar weakness and is moving sharply higher again overnight with the spot gold spread up $8 at $865.3-$865.8 with Financial Spreads. The momentum is very much in the bulls favour at the moment and, whilst my personal opinion of the value of the yellow metal is not one half of the current level, buyers continue to push us higher and higher. The peak at $869.5 is within sight but if we fail again up here it would increase the chances of a short term bear move. With crude oil having hit the fabled $100 level you can almost hear the slathering of lips over the potential $1000 price target.
As mentioned above, crude is continuing to react to the failure to establish a foothold above the $100 mark and we have now fallen $4.50 in two trading sessions. As mentioned yesterday the (relative) calm in Pakistan, which caused the initial spike, and the overall levels supply do not justify a price at these highs. But on the other hand we are one piece of bad political news away from $110 so traders will have to tread warily. The current crude oil spread is 94.37-94.42 for the Brent February market. Major support for the whole move higher is at around $92.00 so another day like yesterday would certainly set the cat amongst the pigeons.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 7 Jan 08
With Friday’s rather dire non farm payroll number on everybody’s mind this morning the focus will be turning towards the Christmas period sales results from a swathe of retailers. Whilst some, John Lewis and Selfridges, appear to have done rather well others, Dixons (it is still difficult to use the appalling name DSG Intl) and Next, have disappointed. Marks and Spencer will be watched particularly closely as Stuart Rose’s love affair with the city has come spectacularly undone over the past year. The stock is over 30% down from its highs and is looking vulnerable to a weaker than expected trading update on Wednesday. Having said that, at least they own many of their retail sites. Debenhams is struggling with a huge debt burden and (from what I could see when I last went in to the flagship branch in Oxford Street recently) a very tired sales floor format. As such the Debenhams spread is being shorted heavily (yet again!) as traders speculate on the company’s long term viability. Not a stock for the cautious, I feel.
With Retail and Banking stocks all in the bargain basement area it is tempting to start buying but as with my comment of some weeks ago ‘bottom picking’ is seldom a profitable activity. Those looking for yield as the Sterling Base rate crumbles may be tempted into buying at these levels and it is difficult, in the long term, to disagree with such an outlook. Barclays stock at close to 7% seems a no-brainer. BUT look at the rates that City Group, Morgan Stanley, CSFB etc. etc. have been forced to pay in raising capital over the past month or so, 9 to 11% plus!! What makes us think that our high street banks are in any better shape to deliver growth in medium to long term? I was also tempted to buy into Barclays just a few days ago at around the 545p level but in discussion with a respected (by me) colleague he managed to dissuade me (thankfully).
The FTSE looks to be opening weaker on the off as the after effects of the US fallout come into play but we may find that other factors are more influential. The continued rush for commodities will continue to bolster the sector within the index. The weakness of the pound will (oddly enough) have added value as well, as some 70% of the FTSE 100 revenue actually comes from abroad. This is why the FTSE 250 has performed so badly in relation to the senior index over the past 12 months or so. Nearly any stock mainly geared towards the UK economy has had a truly dire year. It is not that these companies have all had a bad time of it in 2007 it is just that analysts are becoming ever more pessimistic over future growth prospects.
Anyway, the call on the FTSE early on is for another 20 points off at 6329-6330 and those who like their trading exciting can take pleasure from the fact that the markets remain just as violent as last year. The market remains in the same range as the last 12 months but analysts will worried that the latest move higher failed to get above 6600. Fridays fall broke the short term trend support at 6340. Bears will be eying the next major support at 6115 but there is a great deal of volume congestion between the current levels and here. Traders in pre-market action seem happy to be on the buy side. The Dow having lost over 500 points in the first week of 2008 is not a happy place to be at the moment. The major level that will be concentrating minds is the 12700 support which (if broken) could well indicate a major bear move in the offing.
The Forex markets are showing little change on Fridays close with Sterling remaining on the lows versus the Dollar and Euro. The Yen has had a big run of it recently as the fear of rapid rate cuts in the US and UK have played havoc with long term currency strategies. Since Christmas the pound has fallen from just below the previously mentioned 230 resistance level to the current 214.80-214.91. With a drop of some 6% in just a few days there will be many harsh words in importing company boardrooms as uncovered exposure will prove very expensive indeed (who would be a finance director?). The cost of all those lovely technical gizmos/white goods/cheap clothing etc etc etc will be that much more expensive as the currency effect unwind.
Cable is at just under $1.9700 at $1.9692-$1.9695 and personally I am kicking myself as I have been bearish on the pound for quite some time but never pulled the trigger. The dire public and private finance situation coupled with an appalling current account deficit and a crumbling currency do not make for good reading for Sterling bulls.
Today sees little on the economic front with neither the UK nor the US releasing any important numbers. There is little on the corporate front as well so we can expect little direction from here.
Gold is slightly lower today at $856.2-$856.7 but the love affair with the Yellow metal continues. Everyone always says Gold is an inflation hedge...I am still rather fogged as to why? It gives no real return, costs money to hold and apart from Ego and Vanity factors is not even used much. A product with little return appears to me to be a truly awful inflation hedge much better to buy stocks which can match rising prices with impunity (utilities spring to mind).
Crude Oil gave up on the $100 level in style, falling to $97.80-$97.86 for the Feb Nymex. The political fears of the Pakistan assassination do not appear to have materialised so we may have a great deal further to fall. In reality there is (at the moment) lots of the stuff sloshing about and from the inventories releases not much of a bottleneck here either.
Advert:
FinancialSpreads.com >>
Live Prices and Charts, No Commissions, No Fees.
Spread Trade on Shares, Indices, Forex, Commodities and more >>
details.
|
Spread Trading, 4 Jan 08
Retailers took a bit of a pounding yesterday as DSG announced their second profit warning and Next gave rather a poor outlook for 2008. With more retailers due to give their trading update next week the releases so far have not been good and it looks like the retail sector may be a sector that many investors will avoid this year. With continued reports that lending will become much tighter as now the high street banks look to pull in their reins, securing debt could be more difficult than ever, leading to a big rise in insolvencies. It's been a mixed start to 2008 with the FTSE struggling to trade above near term resistance at 6500, with the next target being 6610 before the market can think about a test of 2007's highs.
There's little in the way of stock news this morning as the market prepares for the first major piece of economic data from the US. Considering the market's reaction to the US manufacturing data on Wednesday where it fell 70 points in 10 minutes and the Dow posted its worst start to the year since 1983, any figure that comes in worse than expected could delight the bears and send indices lower. We are expecting a figure of around 70,000 which is consistent with the jobless claims that have been coming out. Unemployment is expected to rise from 4.7% to 4.8% and the all important average earnings, a key inflationary piece of data should come in around 0.3%, lower than last month's 0.5%. As if that wasn't enough, we then get non-manufacturing data released at 15h00 London time, which the bulls are hoping will not post a figure below 50.0, which indicates contraction.
At the time of writing we are calling the Wall Street spread to open as much as 50 points higher around 13,105 as investors remain optimistic that the US economy will remain on a strong footing if jobs continue to be created at the level expected.
Cable continues to show signs of weakness. After a brief rally back above the $2 mark just before the New Year it has shed 1.5% back to $1.9700. Support is said to be around this level but technically new 5 month lows are being hit making for a weak pound. The dollar is a little stronger against the Euro as well this morning. However this could all change very quickly if some poor data comes out from the US at 13h30 today.
Gold had yet another move higher yesterday with spot almost getting to $870. The highest gold has ever been is $873 in intraday trading. Investors seem to be piling in on any indication of US economic weakness so once again the figures today will be key. Clients remain long and reaping the rewards of this continued, sustained rally.
Crude Oil retreated from $100, but only mildly and you get the feeling that it won't take much to send the price hurtling to new highs if something bad happens or stockpiles continue to remain low. Despite all the hype about $100 the fact remains that we are not going to see cheap oil prices for a long time and the consumer's spending power is already being affected.
Spread Trading, 22 Dec 07
The Daily Comment has now closed for the Festive period. We’ll be back up and running on 4 Jan 08. In the meantime, have a very Merry Christmas and a Happy New Year.
For the latest spread trading update from Simon Denham click here.
'Spread Betting on Markets' by DB, updated 18-Jan-08
For related pages also see:
Financial Spread Betting Companies, updated 05-Sep-08
We've updated the comparison tables to compare more markets, more FX, more commodities, more Indices, more...read article.
Spread Betting Newsletter, updated 05-Sep-08
Q) Average Trading Results?...A) Get free spread betting tips, price updates, offers, important news and more!...read article.
Financial Trading Directory, updated 22-Jun-08
Who to trade with? It's a tough question. Have a quick look to see who offers the spreads and service to suit you....read article.
August Spread Trading Hours, updated 25-Aug-08
August Spread Trading Hours, make sure you do not get caught out. The Financial Spreads opening hours provide an example of what you can expect...read article.
Financial Spread Betting June 2008, updated 06-Jun-08
Spread Betting market trading update: The banking sector took it on the nose once again yesterday and HBOS is now 55p below the LOWEST point on the day of the bear rumour which caused so many headlines back in March. Barclays has experienced nineteen negative trading sessions in the last twenty and you could now pick up...read article.
Financial Spread Bet May 2008, updated 23-May-08
Spread Betting market trading update: This is likely to result in a double squeeze on retail spending through the remainder of this year. That, I fear, is likely to leave those retailers on highly leveraged debt levels in something of a pickle. Banks are not exactly...read article.
Financial Trading May 2008, updated 09-May-08
Spread Betting market trading update: As mentioned several times over the past few days the FTSE is struggling to overcome the 6250 resistance. Although we have closed at or around the level several times traders have shied away from buying above the line. The pressure still appears to be very much on the upside but we are vulnerable at the current level to some bad piece of news. Mind you, markets do seem to have finally got shot of the...read article.
Financial Trading April 2008, updated 25-Apr-08
Spread Betting market trading update: We are still stuck just under the 6100 level this morning but the bulls seem to have the best of it at the moment. Every time we get up to this level it seems as though the break out is imminent only for traders to run...read article.
Financial Spread Bets April 2008, updated 11-Apr-08
Spread Betting market news: FinancialSpreads.com clients have been building up short positions in indices over the past few days so they will be glad to see the market dipping back below the 6000 level this morning. This morning the market has wiped out only half of the gain it made yesterday and whilst this cannot be considered as profit taking, it indicates the ...read article.
Markets March Spread Trading, updated 28-Mar-08
Spread Betting markets: Markets went up down sideways etc but in the end closed pretty much mixed. Europe up about a percent and the US and Americas down a percent. Asia has joined Europe but not enough to influence the open this...read article.
Markets March Spread Betting, updated 14-Mar-08
Spread Betting market information: If the moves by the US do in fact work then this should help across the board. Many punters will be shy of getting too enthusiastic as we have seen these rallies too often over the past few...read article.
Markets February Spread Trading, updated 29-Feb-08
Spread Betting market information: Today we are looking at further opening falls with early the FTSE spread trading at 5945 - 5946 another 15 points lower. The volumes on the exchanges remains weak which is causing such heavy moves as market makers swiftly adjust prices. In conversation with some of the quoting brokers it appears that they are running...read article.
Real-time Spread Betting Prices and Charts, updated 15-Feb-08
Spread Betting pricing information: The banking sector, which has been pretty hard hit anyway, took a triple whammy this week: UBS reported almost unbelievable sub prime/credit losses, Bradford and Bingley reminded us that there are...read article.
UK Markets Spread Trading, updated 01-Feb-08
UK Markets Spread Trading : When the going gets tough the blame game begins and one of the easy targets in every period of uncertainty is the banks. You can hardly open a newspaper today without reading some journalistic outpouring, railing against the evil conspiracy of global money. It might be a good moment to point out that...read article.
Spread Betting on Markets, updated 18-Jan-08
We answer your Spread Betting questions, plus offer tips on getting free Spread Betting charts, real time prices and...read article.
Spread Betting Trading Online, updated 21-Dec-07
Find out where you can Spread Trade online for free, plus your Spread trading questions answered, tips on getting free Spread Betting charts, real time prices and...read article.
Spread Betting Futures Trading, updated 07-Dec-07
Where to trade plus updated Spread Betting trading news and the most popular Spread Betting questions answered....read article.
Spread Betting Broker, updated 23-Nov-07
Where to find free Spread Betting Brokers plus regular Spread Betting financial trading news as well as the most popular Spread Betting questions answered....read article.
Spread Betting Platform, updated 09-Nov-07
Where to find free Spread Betting Platforms plus updated Spread Betting trading news as well as the most popular Spread Betting queries answered....read article.
Spread Betting Software, updated 26-Oct-07
Where to find free Spread Betting Software information plus updated Spread Betting trading news as well as the most popular Spread Betting queries answered....read article.
Spread Betting Prices, updated 12-Oct-07
Where to find free Spread Betting Prices plus updated Spread Betting news as well as your top Spread Betting questions answered....read article.
Easter Trading Hours, updated 04-Jul-08
Easter Financial Spread Betting Hours. Ensure you are not get caught out. The Financial Spreads opening hours provide an example of what you can expect. However please...read article.
Trading Hours Presidents Day, updated 18-Feb-08
A quick look at the President's Day trading hours. FinancialSpreads.com's opening hours provide an example of when you can expect the markets to be open. Please check directly with other spread betting brokers...read article.
Holiday Trading Hours, updated 22-Dec-07
A quick look at the seasonal trading hours. FinancialSpreads.com's festive opening hours provide an example of when you can expect the markets to be open. Please check directly with other spread betting providers...read article.
Spread Betting Comparison, updated 23-Jun-08
Spread Betting Comparison Notes...read article.
Financial Trading Email, updated 31-Jan-08
Free financial trading email. Unsubscribe easily and immediately....read article.
Compare Spread Betting Companies in the UK, updated 27-Jul-07
We provide you free online information on the UK financial spread betting market. Financial spread betting allows you to bet on the key financial markets. Spread betting can give you an edge because the profits that you make from financial spread betting...read article.
Compare UK Spread Betting Companies, updated 03-Sep-07
Compare the width of the key spreads offered by the spread betting companies. Does your company offer the narrowest spreads?...read article.
Financial Spread Betting Articles, updated 03-Oct-07
Hundreds of spread betting articles from the latest news to spread betting tips to how to spread bet to where to find the latest prices, free charts and...read article.
Financial Spread Betting, updated 13-Nov-07
Welcome to Clean Financial - the financial spread betting and trading website. Get free spread trading news, tips and strategies, company reviews, discover important account options and more....read article.
|
|
Q) Average Trading Results?
A) Get free spread betting tips, offers, price updates, important news and more
|
|
