Spread betting news digest
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Spread betting news digest presents market analysis and financial spread betting information and commentary by the editor of the spread bet trader website.
Quantitative easing turpedoes Pound sterling
[Posted on 06/08/09]
In my recent analysis of currency spread betting opportunities, I focused on the immediate outlook for the British pound exchange rate with the US Dollar, the Cable, as it is known to traders.
At the time the Cable was trading just above $1.67. I concluded that analysis by stating that:
… From current levels, the immediate upside target is 1.6850 and then the price band 1.7020–1.7050. As always, all bets should be protected with adequate stop losses.
As at today (Thursday 6th August), that 1.7020–1.7050 upside target has been hit by Cable.
However the short term uptrend was cut short (at least temporarily) by the announcement by the Bank of England that it plans to expand its quantitative easing programme.
Traders took that as bearish news for the Pound sterling since increases in the money supply erode yield support for the British currency. Besides, the news fuelled concerns that the Bank is worried that its efforts so far have failed to bring the UK economy back from the brink.
Once again, this episode demonstrates something that I have always emphasised on this website: “spread betting positions must always be protected with stop losses”.
Well-paced stops helped us preserve much of the gains that we have accumulated in the US Dollar/ British Pound (Cable) trade over the past few trading sessions.
Consumer confidence the banana skin for equities?
Following a record-setting string of positive days, the major US equity indices are currently trading lower.
Once again, the trigger is the news that US consumer confidence probably fell in July. The word "Probably" is used here because the data published today is only preliminary. Nevertheless, it has the power to move markets—if only in the short term. This is because consumer confidence is a closely monitored indicator of consumer spending. And consumer spending typically accounts for about two-thirds of US GDP.
The impact of weakness in consumer confidence cannot be overemphasised. People fearful of losing their jobs in addition to significantly lower house prices could throw a giant spanner in the wheels of the tentative economic recovery.
However, before you go out and sell sell sell, remember that this is only preliminary data. A similar occurrence last month is worth bearing in mind.
On June 12, the preliminary reading on consumer confidence suggested that the index was at 69 whereas market expectation at the time was for a reading of 69.5. That led to a negative stock market response. However, a couple of weeks later on the 26th, the final reading on the University of Michigan Consumer Confidence Index showed that the index actually rose to 70.8 in June.
The data out today is preliminary estimate for July. The reading of 66 was lower than June’s 70.8.
From a technical perspective, the equity markets remain on strong grounds for a continuation of the ongoing rally—even if we do see a bout of nervous profit taking.
See the latest analysis of stock market direction for a more detailed view on where the markets are heading.
Have a great weekend
Overnight spread betting market update
Spread betting US equities
US equity markets were mixed at the closing bell. Of the major indices, both the Dow Jones Industrial Average and the Standard and Poor’s S&P 500 index finished lower. The Nasdaq ended the session about half a percentage point higher.
S&P500 closed at 954.07—down 0.51 (-0.05%)
Dow closed at 8881.26—down 34.68 (-0.39%)
Nasdaq at 1926.38—up 10.18 (0.53%)
Asian stocks were mostly buoyant on Thursday, driven by gains for manufacturers that rely on demand from the US.
Spread betting Asian equities
Nikkei was up 0.1% at 9,735.97
Topix was up 0.1% at 907.46
Hang Seng was up 2.36% at 19,703.37
Spread betting currencies
For those who keep and eye on currency markets, spot rates for three of the major currency crosses are provided below:
Spread betting commodities
Nymex (Light Crude) was up $0.25 at $65.65
Brent Crude (ICE) was up $0.06 at $67.27
Comex Gold was down $1.20 at $952.10
Copper (Comex) was up $0.0745 at $2.5255
Spread betting soundbites
[Posted on 20/07/09]
The bulk of recent economic data has been positive for the markets. This positive newsflow is lending strong support to the equity markets which continue to rally.
-US Housing Starts for June rose to 582K: the data was better than the markets expected
-US Building Permits for June rose to 563K: here again, the report was better than expected
-Unemployment data: 6 US States saw record levels of unemployment. The jobless rate in the state of Michigan topped 15%—the highest of any state in 25 years! California also reported record levels of unemployment.
-In a speech in Washington, Larry Summers (director of the White House’s National Economic Council) was quoted as saying: “While employment continues to contract, the available indicators suggest that GDP is on close to a level path with prospects for positive growth to commence during this year”.
-German Producer Prices month/month: down -0.1% vs market expectation of a gain of 0.4%. Corresponding year/year data was -4.1% vs -4.6% expectation.
-Hungary gets EUR 1bn from foreign investors in first bond since last years IMF bailout
-UK Rightmove House Prices showed a gain of 0.6%, following a previous decline of 0.4% in the last data.
The bottom line for spread betting:
So far, the combination of positive macro economic newsflow and sound short term technicals suggest further gains is likely in the stockmarket indices.
Spread betting strategies: Next week in the stockmarket
[Posted on 19/07/09]
I highlight below a number of events that should be noted in your trading calendar.
Any one of these scheduled reports could either throw a spanner in the works of the ongoing market rally or provide renewed impetus for the market.
The S&P 500 index is currently skirting with a rather significant technical event. The 950 price level is a psychologically important one for traders and a move beyond there on strong volume may well provide the final signal that the worst of the bear market is behind us. Such a break out will be expected to bring in substantial amount of new money into the market in anticipation of another leg higher in the equity markets.
US: June Leading Indicators
UK: Rightmove House Prices
US: Chicago Fed National Activity Index
UK: Public Sector Net Borrowing
US: House Price Index
UK: Bank of England Minutes
US: Initial Jobless Claims and Existing Home Sales
UK: Retail Sales
US: University of Michigan Confidence Index
UK: GDP report
With the S&P 500 index currently hanging on to 937–940 price range, a strong reading on the June Leading Indicators on Monday may provide the economic backdrop to sustain the rally.
Remember, it is not so much the number that is reported as the comparison of that number to market expectations that is important. On the back of last month’s gain of 1.2%, market consensus is that the index of Leading Indicators (due out on Monday) would post a gain of 0.5% for June. A higher-than-expected reading could put some spark in equities.
Hope you find this economic calendar a useful spread betting resource.
Have a great weekend
Thrill-seeker or profit-seeker? Which type of trader are you?
[Posted on 15/07/09]
In a recent article titled “Day trading returns as investors look to benefit from the stock market volatility, the Telegraph newspaper noted that stockbrokers were reporting bumper trading volumes driven by investors trading on a daily basis to take advantage of the increase in stock market volatility.
According to the article, over the past few months since the Spring, execution-only investors have ramped up their trading activities buying and selling everything from exchange traded funds (ETFs) to contracts for difference, spread betting and conventional stocks and shares.
Apparently, gone are the days of the reckless day-trader making high-frequency trading decisions on a whim. If you believe the sales pitch from one of brokers quoted in the report, “the new breed of active trader is savvy, educated and uses all the research thrown at them. Unlike the days of the tech boom they are not relying on tips from taxi drivers. ”
Hmn! Great! So why are they day trading?
[Of course, you all know that most of what is put out as “research” online and in most financial media these days is no better than tips from taxi drivers…but I digress]
My spread betting advice here is simple:
–Most professionals, never mind private spread bet traders, do not have the time or the temperament to make money consistently from day trading;
–Most spread bet traders do not have the bank balance to sustain the devastating losses that day trading on margin can inflict;
Of course, sometimes, you place a trade with the intention of staying in for a few days but due to unanticipated increase in market volatility you decide to close out the position at a profit of even simply get stopped out at a small loss. But this is not the same as setting out from the outset to day trade.
Bottomline is this: You day trade at significant risk to your hard-earned cash.
When genius fails, what hope for mere mortals?
[Posted on 13/07/09]
Today's spread betting news commentary looks at the case of a fallen star.
Many private traders may not readily recognise the name, but John Meriwether is something of a big hitter—indeed, as big as they come—in professional trading circles. Meriwether was one of the notable brains behind Long-Term Capital Management (LTCM), which remains perhaps the most high-profile hedge fund collapse in history.
LTCM was a U.S. hedge fund which used high levels of leverage to squeeze out profits from strategies including fixed income arbitrage, statistical arbitrage, and pairs trading. In addition to Meriwether—the former vice-chairman and head of bond trading at Salomon Brothers—the hedge fund had lauded academics Myron Scholes and Robert Merton, winners of the 1997 Nobel Prize in Economic Sciences, as members of its Board of directors.
The fund failed spectacularly in 1998 when following a series losing months, losses were magnified by the Russian financial crises in late summer 1998. It was deemed too big to fail at the time and the Federal Reserve supervised a bail out in order to prevent a domino effect on the US and global financial system.
Well, shortly after that collapse, Meriwether was at it again with the launch of another hedge fund, JWM Partners LLC in 1999.
Fast forward to 2009 and that new fund, which had a value of about $1.6bn at its peak, is set to shut down. Apparently, the fund has declined in value by about 44 per cent since the start of the ongoing financial crisis in September 2007.
Now, this is the thing. If top trading talents such as John Meriwether find the markets rough from time to time, what then can most traders expect? Don’t sweat the small stuff…there will be times when you simply can’t seem to place a wining trade to save your life! Keep a trading journal and review your performance in order to spot errors and make adjustments to your process. Markets are in a state of constant flux. Remember that a strategy that works in one market environment (such as a range-bound market) may not be well suited to another (e.g. a trending market).
Food for thought, hun?!