Spread betting strategies for July 21, 2009

Last weekend, in my posting in the Spread Betting News Digest section of this website, I noted the a raft of economic data due out this week could provide further impetus for the bulls to get the major stock market indices past the impending price resistance areas.

Medium term spread betting strategy: S&P 500 index

While not all of the major equity market indices have crossed that line, one notable development is that the gain of 10.75 points on the S&P 500 on Monday 20th means that the index is now within the long-running price resistance band of 950–956.

Although most technical analysts out there use a single price point (950) as the key resistance, that spot estimate approach is often flawed since prices rarely ever hit a single point repeatedly. More likely, they form price clusters or bands which act as milestones or springboards for future moves.

Nevertheless, a glance at the chart of the S&P 500 below shows clearly that the index is now on the verge of a notable breakout.

An upside breakout on strong volume should see the Standard and Poor’s S&P 500 index hit 1000–1060 in the medium term, and potentially 1200–1250 in the longer term.

Medium term spread betting strategy: Dow Jones index

With the Dow, the notable medium term price resistance is around the recent June highs at 8877.93.

The price resistance band however extends from 8875 to 8900, so that in theory only a break of 8900 (not just a move above the spot price of 8877.93) would give a conclusive indication of renewed bullish momentum and potentially herald another leg higher in the index.

Such a move is now increasingly likely given the recent technical improvements. The fact that recent fundamental economic data has also been supportive only lends credence to the bullish case.

An upside breakout on strong volume should see the Dow hit 9600–9800 in the medium term, and potentially 10800–11000 in the longer term.

Medium term spread betting strategy: FTSE 100 index

With the Footsie, the immediate short term price resistance area that needs to be overcome is around 4500–4520.

In the bullish scenario, an upside breakout on strong volume should see the Footsie 100 index hit 5000 in the medium term, and potentially move all the way to 5540–5680 in the longer term.

Medium term spread betting strategy: German Dax index

Finally, let’s take a quick look at the major European stockmarket index below as a freebie for those interested in spread betting the Dax.

Like other major stockmarket indices, the Dax has staged a strong rally off the swing lows set in early July.

As things stand, in the bullish scenario, an upside breakout of 5177–5200 on strong volume should see the German Dax index hit 5750 in the medium term, and potentially move all the way to 6250–6500 in the longer term.

All the analysis presented above pertain to market outlook over the medium-longer term.

This means there is likely to be significant market swings between current price levels and eventual medium and longer-term price targets.

While more risk-tolerant, buy-and-hold investors could simply enter buy bets from here, more subtle and active spread bet traders should trade in and out of positions as the trading picture unfolds over coming weeks and months.

As things unfold, more time-sensitive analysis would be presented in the Market Timing Update which details effective short term spread betting strategies.

Spread betting strategies

Spread betting strategies: bullish outlook for stock markets

Medium term spread betting strategy: S&P 500 index

Medium term spread betting strategy: Dow Jones index

Medium term spread betting strategy: FTSE 100 index

Medium term spread betting strategy: German Dax index