Well the FTSE 100 seems to have stabilised a little after the recent massive falls the question is what’s going to happened next? While I cannot predict what will happen next I can take a look at the FTSE 100 chart and use technical analysis to try suggest what is happening at the moment. If you take a look at the chart below (Click on the Image to see a larger version) I will explain what I think is happening. FYI this is not a trade recommendation or advice of any kind it is my opinion and mine alone, what you choose to do after reading this is your choice. Don’t come crying to me if things don’t work out how you expect them too.
Click image to see larger version. Image © SpreadCo
Ok So looking at the chart I’ve circled and numbered 5 key points in yellow.
Point 1. The FTSE 100 failed to get past the previous high made back in May 2011.
Point 3. The FTSE 100 fails equal or better the high set at point 1.
Point 3 to 4. A new low is formed at point 4. On the way from point three the price passes the lows set at point 2 and the previous lows made in June and March 2011.
Point 5. Well it’s too early to say if this is a lower high than point 3 or point 1 as the price could continue to rise.
If you believe the idea that price retraces one third to two thirds the previous move, usually making it to half the previous move then point 5 is quite interesting. I make it a high of around 5400. So if we say the previous down move has a high of 5966 (point 3) and a low of 4791 (point 4) FYI I got these values from proRealTime as these represent the true market price not the price quoted by the spread betting company and proRealTime only shows values achieved during actual trading hours. Using these high an low values this represents a down move of 1175 points. Therefore 33% is 391.6 or 5182.7 FTSE value, 50% is 587.5 or 5378.5 FTSE value and 66% is 783.3 or 5574.3 FTSE Value.
I think these figures are especially interesting as proRealTime shows a high on the 15th Aug at 5377.23, the image I have here shows more like 5400. Still the fact remains that we are currently around 50% retrace of the previous move.
A down trend is defined as a series of lower lows and lower highs. This box can be checked, and with the 50% retrace in place a new down move could be about to start. Also if you take a look at the 20,50,200 moving average combination it shows they are all in decline another indicator that a down trend is in force. So with all that said it should be easy to suggest that the FTSE 100 can only do one thing and that’s fall. Wrong, while the evidence is strong for a continued fall it’s by no means guaranteed. So tread carefully whatever you do. For the time being I shall be leaving my pension pot in cash until I see some evidence of an upward move.
So I’m definitely erring on the side of short positions for the time being. If the FTSE 100 should fall past the most recent low then I will definitely be classifying this as a down trend an only looking for shorts. Obviously it could even fall below that level and then rise all the way back up, no one can say for sure.
Onto my spread betting action. Well it’s pretty much no existent at the moment, hence the rambling about the FTSE 100. No new trading opportunities are coming along so I’m waiting and adjusting stops on the two positions I have open. I’m happy to wait, the right opportunity is just around the corner. When the market wants me to trade it will let me know. Which is how it should be in my view. Don’t go looking for trades, let the trades come to you.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner
Well it’s been a while since my last post for a few reasons. Firstly work is hectic and second it was my birthday last week and I had family visiting to help me celebrate. It’s always nice to see all the family although the time seems to whizz past when they are here. Anyway onto the business of spread betting.
Well the markets seem to be finding some confidence from somewhere. I’m not sure where and I’m not convinced that the recent upturn in price is nothing more than a rally because of the depth of the previous down move. Now I have no idea what the markets are going to do next but will all the doom and gloom there is about I don’t see much for people to be optimistic about. At least one good thing since I last updated it seems the recent riots have now stopped. I have to say I think it was bad few out of what is generally a good population. I totally agree that they need to be dealt with using the full force of the law. I understand that times are tough for people but looting from other people is not the answer. Anyway that’s enough of that, back to the financial markets.
You may recall in my last post “Did anyone say Bear Market Rally” that I pointed out Vince Stanziones system would’ve got you short of the FTSE 100 on 18th July. The thing I forgot to mention is on the same day a super trend cross occurred. This would’ve been a potential trade for myself according to my strategy. It was too much risk for me but never the less was a potential trade. If you assume a short at the low of the day it would’ve been 5752. The super trend value is 5443 meaning a 300 point locked in profit. Ok so the initial risk would’ve been around 275 points so as it stands the trade is only just above a 1:1 risk reward ratio but there could potentially be further for the FTSE to go. I have no idea what it’s going to do but I how I said there’s that much doom and gloom about I can’t see a bull market returning for a while yet.
My own spread betting has stagnated. With such high volatility there haven’t been many trading opportunities that fit with my strategy. In fact last week there was one day when there were no super trend cross overs at all. That is something that I have not seen for quite a while. Anyway there is no rush for trades to come along. When the right opportunities arise I will hop on board then and hopefully make my profit.
In other news I will be having an article published in the UK edition of Your Trading Edge magazine. If you would like to read the article you can get a years free digital subscription on the Your Trading Edge website. In the where did you hear about us select the Spread Betting Beginner option. Hopefully you will find the article useful, it’s all about developing a spread betting strategy. As far as I’m aware it will be in the next issue of the magazine which I believe is available at the end of this month. So sign up now and you’ll be e-mailed when the next edition is available.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner
Well there was a glimmer of hope in the markets from our friends across the pond in the US. They announced yesterday that interest rates would ‘probably’ remain at their current level of between 0% and 0.25% until at least the middle of 2013. Thank god our prayers are answered, finally an end to the recent down turn, and the survey said, uh-uh (imagine the family fortunes noise). I think my favourite quote is from BBC News
“University of Oregon economist Timothy Duy described the Fed’s announcement as “weak medicine”
Weak medicine, more like a placebo. Who in their right mind thought that this was enough to stem the crashing markets that we have been seeing. I didn’t think for one minute it would be enough. It was enough however to produce a bear market rally, or at least that’s what I’m calling it. With hindsight I should’ve spread bet the FTSE 100. What did I say in my last post, it would fall below 5000, then recover to above 5000 before falling back below it. Well two out of those three steps have emerged and I suspect with all this speculation about France now it wont be long before it’s back below it. That said I made those comments merely from my own observations over the last few years. It just seems to be the way the prices react around the round numbers like 5000. I think spread betting this observation however would be foolish of me and no doubt I would lose money because of it. I’ll stick to my strategy for now. If the downwards move continues there will be plenty of shorting opportunities along the way for me.
Interestingly Vince Stanziones Spread Trading system would’ve seen you short the FTSE 100 back at the end of July(*Correction: It was the 18th July not the end) and by now you would be doing very nicely from it thank you very much. You would currently be sitting on about 700-800 points profit. If you would like to find out more about Vinces system you can read about it on Vince Stanziones Website.
My own spread betting has seen no new trades, just maintenance (moving stops) of existing ones. I had a look earlier for new trades but nothing that fits the bill has come along so I’m waiting. I’m kind of torn in times of high volatility such as now. On the one hand I think I might be missing out, but on the other I’m happy to wait until things settle down a little more. I mean look at trading yesterday. By my calculations the FTSE 100 traded in a range of over 300 points. That’s huge. I don’t think I could handle swings that big. That could easily wipe out my account in one day. Best to leave it alone for now. Once the markets have settled down there will be plenty of opportunities ripe for the picking.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner
All aboard the FTSE 100 Express next stop 5000, Choo Choo. Can you believe it the FTSE 100 is down for the 7th day in a row. Any we’re not just talking a few points down either. At the time I’m writing this it’s currently around 170 points down. I hope your on the right side of this decline. I know I said this before but I’m so glad my pension pot is mostly in cash.
I read about the US downgrade at the weekend and then I saw the news about the ECB wanting to put measures in place to try and ease the markets but at the moment they just don’t want to be eased. There is that much doom and gloom about that I don’t see this down move ending anytime soon. I suspect we may see a bounce over the next few days if the FTSE 100 finds support at 5000ish. What I would suspect will happen is the FTSE will dip below 5000 then come back up through 5000 before going back below it again.
How I said I don’t see this subsiding for a while. Let’s look at what sparked all this off anyway. The US government if so many $trn in debt. They are unable to repay this debt so they say lets just borrow more. I’m not being funny but if you or I couldn’t afford to pay our mortgage do you think he bank would lend us more money to pay it with? Hell no. They tell us we have so many days to pay and that’s that. If we don’t pay then our house gets repossessed simple as that. Now I know it’s naïve to compare the debt of an entire country at an individual level but I think it governments want people and banks to be responsible about borrowing money then they need to lead the way. The whole credit crunch crisis was caused by banks lending money to people who they knew full well could not afford to pay it back. Isn’t this the same thing? The US has big big problems and allowing themselves to go further into debt is not the solution. I totally agree with S&Ps down grade of the US credit rating. Personally I think it should be lower. It’s time to stand up and be counted.
You do have to feel a little sorry for Obama thought. He’s really inherited this mess from his predecessors and now he’s the one facing the music for the mistakes of others.
Anyway that’s my rant about the state of the world economies out the way on to the juicy spread betting news. Well I did have one trading opportunity today but I had to pass it up because of my risk tolerance. In case your interested it was a short in Shroders. New down trend formation, super trend cross and a Vince Stanzione cross could be a good trade. Problem is the risk is almost 200 points which is way to rich for my blood so I passed.
Both my open positions made some good ground today. They are both shorts so you would think they would fall in sympathy with the rest of the market. I just hope the continue to fall. I’ll be moving stops on them later when my super trend value updates.
I’m sure you will have noticed that we had a guest blog post today from Chris. If you have yet to read it you can find it here: Stock Markets – shares a good or bad investment
It’s interesting he has a buy and hold approach. He’s right to suggest that the major Indices do recover if you wait long enough. The thing is If I had brought the FTSE 100 at 6000 I wouldn’t be holding on for a recovery, I’d take the loss and look for a new trading opportunity. That’s the thing with spread betting, you can make good money from going short as well as long. So if you receive an exit signal take it and if you see an entry signal for a short take that. One of the main features of spread betting is going short as well as long. Where is the point to hold onto something that is down trending and losing money in hope of a recover 2 years down the line. If you don’t want to go short then at least sell out and wait out the down turn until a return to an up trend starts, that’s what I’m doing with my pension anyway. All that said this is not advice of any kind. It’s merely my opinion. What you do with your own money and trading it up to you.
Anyway thanks to Chris to adding that post.
One last thing. As my subscribers will know City Index are offering £150 Trading credit for new accounts(Conditions Apply). If you would like to receive this offer and others like it you will need to subscribe to my spread betting news letter. This offer expires on the 31 August 2011.
Until next time,
“May the markets be with you!”
Harry,
The Spread Betting Beginner
Well here we are again with all the Press, TV and radio all saying it’s the end of the world as far as the stock markets are concerned. I would urge all investors spread betters included to look on the stock market as a long term investment. By all means take a quick profit if it’s there. but if you are nursing losses, the likelihood is , if you do not crystallise your loss by selling and leave your spread bets or shares in there, over the next 5 years or so they should prove to be a good investment.
I understand for most it is sensible to have stop losses in place. in April 2009 all my bets on the DAX were stopped at under 3500, within 2 years that index was back above 7000. The April 2009 experience cost me many thousands of pounds.. Since then I had all but clawed those losses back until last week. When the losses start coming in again. Am I perturbed,depressed or full of FEAR, no. History shows quality indices (Nikkei aside) do recover. I now follow Warren Buffett’s example of buying quality blue chips and if no short term profit is there, just leave them until a good and respectable gain is showing. Yes you need to have a positive manner when each day you look at your SB account and see those red figures but look on it as one day nearer to the big push upwards. Bear markets are generally shorter (but harsher) than bull markets which tend to run for much longer periods. The DOW and FTSE tend to have about 10 days a year when they are massive gains that come like a bolt from the blue and I don’t think even the best strategist can capture them other than leaving your money in there.
I recently finished reading the Naked Trader 2 by Robbie Burns and I would strongly recommend this book. Robbie conveys a no nonsense (but at times humorous) guide to investing in equities (via the stock market and by spread betting and also the many advantages of the latter way of investing)) and checking out backgrounds to companies, debt level, Annual Reports etc -very good. Other suggestions the Richest Man in Babylon and also Rich Dad Poor Dad, both great books for developing a positive mind set.
Keep positive!
Chris
Chris has been trading spread bets since early 2009. He is a traditional share and mutual fund buyer since 1973, starting with M&G American and General Accumulation Units. He focuses more on technicals than fundamentals, believing we are the last in the media chain to hear things “it’s yesterday’s news”. He uses an investing strategy when purchasing spread bets and is guided very much by long term trends. He focuses particularly on DAX, DOW and FTSE (has given up on Nikkei) and looks for blues chips like BG (British Gas), BP and Tesco.
