FuturesTechs Blog

I think i did a reasonable job of explaining it on CNBC this morning (you tell me!!) so instead of babbling on too much here I’ll post the link:

http://www.cnbc.com/id/15840232?video=820121614

To summarise I said that 850 is a MASSIVE support level, and that the weakness to here is a buying opportunity, although if 850 breaks you don’t want to be long, and a “stop and reverse” (see below) strategy might be advisable.

We get “proper” confirmation of a bounce happening if resistance levels like 872.6 and 900 are retaken.

In Brent Crude Oil I mooted the idea that we might be due a bounce some time soon as we’re getting close to some important supports.

And in the Bund Futures I talked about a Double Bottom formation which gave us a buy signal last week.

I steered clear of talking about Equity markets because the short term outlook is a tad confusing, and we haven’t had the best of time calling these of late, if the truth be known.

“Stop and Reverse” is where you have a position and you get out of it with a stop order, but at the same time you do the same trade to create an opposite position.

For example say you were long five lots of Gold at 870 with a stop order at 845, that means you want to get out and take the loss on your trade if the market goes down as far as 845. A stop order is defined as a market order that’s triggered if your loss reaches a certain level or price. You should always have a stop order on any trade that you put on, and technical levels can be the best way of deciding where to place these orders.

Many people place their stop orders below important support levels (like 850 in Gold) and sometimes, if you think the move below this key level is going to trigger a wave of selling, you may want to initiate a short position at the same time. If you put in an order to sell 10 lots at 845, to continue using our example, you would take the loss on your 5 lot long, then create a 5 lot short position at 845. If the market then went to 775, as we expect, you will offset the 25 point loss on the original buy order with a 70 point gain on the short trade.

Have a good week.

Cheers,

Clive.

I, like many technical analysts, place quite a heavy reliance on Fibonacci levels, especially for “bigger picture” calls and direction.

So what’s it all about? FuturesTechs members have a couple of articles I wrote a few years back that they can access in our Members’ area that explain things (I hope) quite well.

Take a look at the number sequence below:

1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144.

The eagle eyed amongst you would have spotted how this sequence (called the Golden Sequence) comes about:

1+1 = 2

1+2 = 3

2+3 = 5

3+5 = 8

etc etc

Now divide the numbers in the sequence by the number preceding it. You will find that it comes out at a constant 1.618. This is known in mathematics as “Phi” (with a big “P”).

Now divide 1 by 1.618. What do you get ? 0.618.

Some pretty amazing symmetry, eh?! This number is called “phi” (with a small “p”).

Now look at your body. You have 5 fingers with 3 bendy bits on the end of your arms, that also have three bendy bits, that are stuck to your body that has 5 things sticking out of it (arms, legs and head just in case!!). All numbers in the Golden Sequence. There are plenty of occurrences in Nature as well (see the aforementioned articles in our Members area for more).

The most common usage of Fibonacci numbers in the financial markets is when things are retracing a big move, and this is what I thought I’d talk about today, because we’ve just busted through one such level in the Bund Futures.

You see between March 17th and June 19th this year (2008 in case you are reading this in years to come!) the Bund has sold off from 118.51 to 109.65 (using the adjusted continuation charts that we favour for Bond contracts). The market then started to rally, and once this got going we started to target 113.03, because at this level the market would have taken back 38.2% (100-61.8, in case you’re wondering!) of the weakness. This is the first big Fibonacci retracement line. On July 15th we got to a high of 112.88, so just 15 ticks away from our Fibonacci level, and the market promptly fell over. We posted a Shooting Star on that day , a strong reversal pattern in Candlestick analysis (highlighted on the chart below, which you can click on to enlarge). We sold off after this and within a week or so we were back testing the lows from mid June.

The rally that we’ve seen since July 23rd has seen us back testing this key 113.03 level once more, and today we’ve broken above here, on Trichet, and we’ve posted a strong reaction higher to boot.

The way we work here is to look for the 50% and 61.8% retracements as the next targets above once the 38.2% retrace is out of the way, so in the Bund our targets are now 114.08 then 115.13.

Finally I’ve been on the box again, so if you fancy listening to me blabbing on about Brent Crude and the Bund Futures then Click here.

One of the things we at FuturesTechs towers take very seriously is Marabuzo lines.

What are they? A large bodied candlestick on a Daily chart is the result of a big one way push over the course of a day. In the example of large red real bodies the market often wakes up the next day sure in the knowledge that yesterday’s bout of selling should be good enough to guarantee further losses today. But sometimes things feel a bit overdone and there can be a reaction higher the next day. The big question then is whether this is a short term gains that deserves to be sold into, or if the market is going to continue to rally and take back the losses of the previous day?

The Marabuzo line is the halfway point of the real body (ie halfway between the open and close) of any large bodied candlestick, and we’ve found them to be excellent reference levels in the days after this “big event” Candles.

This week’s ICE Brent Crude Oil Chart is no exception. Last Thursday we saw a big down day.

The Marabuzo line of this session’s Candlestick was 133.78.

The high last Friday was 133.69

The high on Monday was 133.57

The high on Tuesday was 133.75.

Close enough?!

Tuesday turned out to be a pretty Bearish day, as was Wednesday. The Marabuzo line of Wednesday’s big red candle was 127.36, and Thursday’s high/failure was 127.25. Close enough?!

Which prompted our Brent Comment today, as per below. You can click on the image to see it in full size.

All very interesting, I’m sure you’ll agree.

Have a good weekend, and be sure to subscribe to our members area so you don’t miss out on these sort of calls. Click here.

Come on Essex in the Twenty20 tomorrow! And a Happy Birthday to my old mate Mickey. How old?! OUCH!!!

Another busy week in the markets:

Bond markets have pretty much gone one way all week, and it’s been quite tidy, barring the first hour blip in the Eurex Bund Futures on Monday. I have spoken to several traders this week as it was the IDX Exhibition in London. To a man they said that Monday was one of the craziest moves they’d ever seen in these markets. Technical Analysis allowed us to step back from this and suggest it may be a selling opportunity. Sweet!

Equities have been pretty predictable, I think. Across most markets is looking increasingly Bearish and I said at the SII Risk Forum last night that I think we’ll see a fresh test of the Year’s lows soon in things like the FTSE, DAX, Dow Jones and S&P. The NASDAQ has been the most resiliant of late, but even that has now given a sell signal.

Oil is a market for the brave right now. It’s just insane!!! In the Brent Crude Oil contract on ICE we’ve seen so much volatility that it does smack of a top, but as yet we haven’t broken any really important supports, so we’re not calling a top. In fact we still consider that weakness should be bought.

And a football tournament that I have absolutely no interest in is, I have to admit, somewhat strange. I really want Holland to keep up the good work, partly because I really like the Dutch people anyway, and partly because Monday’s game was (what I saw of it) a real joy to watch.

$16.80 in 2 days. That’s how much July Brent Crude went up on Thursday and Friday of last week. That’s just under 15%.

A rise of just under 15% in 2 days? Excuse me? Are you serious?

Has anyone dusted off their pushbike over the weekend? If you didn’t you may be by next weekend! Make room for the car in the garage. You can get fit on a bike, and save on petrol!

And the price of Oil could go a lot higher in the coming days and weeks because we are in a bubble. So what does this mean for us as traders?

I tell you one thing: It doesn’t mean sell it!! This is a common mistake to make. You don’t get prizes for selling the top of a market. You shouldn’t be trying to sell into such rises. What’s wrong with trying to get on the dominant up-move? Or to get back to the pushbike theme don’t you prefer cycling with the wind behind you rather than it blowing into your face?

We could easily go to $150, or even beyond, and it can happen in the coming days or weeks.

Even if I look back at this Blog and today turns out to be the day we topped out I wouldn’t be worried, because I can safely say I don’t care if I miss the first 10% of the sell-off, because there will be a lot more to go to take advantage of.

Last week, when we were selling off, we said that we’d expect the buyers to return to the fray at some point, and we had a key support at 121.40 suggested as a bold level. What was the low? 121.32.

It’s much better to buy a pullback in a strong uptrend than continually try and bat against it by being short.

Just think about being on your bike on a windy day!!

We have had our new website available for around 1 month now and we are starting to gain momentum for our new “per end user” offering. Private Investors, CFD and Spread Bet traders are starting to sign up and see the value of our service.

In recent days we’ve seen some interesting moves in the markets:

Gold Futures have turned over and after a plethora of sell signals yesterday we went Bearish this morning, just before the market sold off sharply.

Brent Crude Oil Futures has seen a big sell off but we’re certain this is merely a buying opportunity.

We have remained Bearish in the short term on Equity markets but our patience is being tested on this, particularly in the DAX Future, never one to willingly play the game!!

Interestingly today’s early high/failure in the S&P 500 Futures could be key and suggests that the market can head lower in the short term.

Login for a free trial to see our thoughts on these movements in more detail.

So to a question we’ve been asked a few times of late: Where did we appear from?

We have been servicing professional traders for 8 years now. The company formed in March 2000, soon after the closure of the LIFFE Floor. The traders who congregated on the LIFFE Floor headed up to different offices around this time, and suddenly they needed an edge, they needed information. I always had a string of traders who used to come and have a chat about the charts when I was based on the Floor, and so it was a natural progression to turn this into a daily commentary. I started by sending out a daily report on Bunds and T-Notes, and it grew from there. We grew with the Industry. Proprietary trading accounts for a good percentage of the daily Volume on exchanges like LIFFE and Eurex.

We wanted to expand our horizons beyond this arena, though, so it was a choice of Banks and Hedge Funds or Private/Retail Customers. Which way to jump!? We have found over the years that “bean counters” at the Institutions can cause problems for services like us, because they see a lot of free technical analysis being provided by the large brokers vying for their business. “Why pay for something that you can get for nothing?” -they say.

So we came up with the idea of a Members website where the reports can be viewed securely, on a “per end user” basis, which allows us to significantly reduce the price without upsetting our existing professional clients who pay for a “Site Licence” and the ability to distribute the reports amongst their traders.

We encourage you to take advantage of the chance to utilise this professional trading tool in your daily trading routine.

There’s plenty going on around the traps this week. Let’s just go through a few highlights:

Oil is the one getting the headlines, with ICE Brent Crude getting up to $135 before selling off hard today. The NYMEX WTI* has done a similar thing; selling off $5 from a high just above $135 over the course of today.

As of this moment we wouldn’t be calling a top in this one despite this volatility. As we said last week, one swallow doesn’t make a summer. The lack of reaction to last week’s Doji Candlestick pattern proved that!

Saying that we might not be far away from a capitulation (it’s certainly starting to feel that way), but trying to pick the top of a market like this is a dangerous and foolish game.

Equities looked toppy last week, as we flagged in the Blog, but it took a few days before we turned over, although the DAX Future held key psychological support at 7000 today, and the FTSE Future is holding support at 6139.5, the last higher low.

But it’s Debt markets that are catching my eye this week. We have seen a sell off of 90 ticks in December ‘08 Short Sterling Futures. In simple terms that means a swing of rate expectations for December of almost a full percentage point. In other words this week the market has decided that there’s little chance of more rate cuts from the MPC, a sign that maybe things are settling down a bit. This is a quite spectacular move for a contract that is usually pretty “steady as she goes!”

For those of you who are finding trading things like the DAX and Oil a little precarious and volatile you can often put good directional trades on in these Interest Rate Futures, as the Central Banks try not to cause too many surprises; flagging their intentions with their rhetoric as they go along, and guiding the market if expectations are going awry.

Many professional traders trade huge amounts of size in these contracts every day. The equivalent in Europe is the Euribor, and in the US it’s the 3 month Eurodollar Futures. They are among the most actively traded Futures contracts in the world.

Check with your Spread Bet provider how wide their spreads are on these products. They should be quite tight, because they don’t move about quite as much as things like Equity Indices, Gold and Oil.

Let’s finish up by clearing up some confusion: We produce a report each day on NYMEX WTI.

NYMEX is the name of the Exchange where it is traded; the New York Mercantile Exchange, one of the few remaining “open outcry” Futures Floors (due to be taken over by the CME Group). WTI stands for West Texas Intermediate. This is the Benchmark Crude Oil in the US, and is also known as “Light Sweet Crude”.

Happy Trading,

Cheers,

Clive.

We were cheered by last Thursday’s rally in Equity markets, where the technical charts gave breakaway signals on several markets. Since then many Equity markets have held key support levels and we continue to move higher.

We are now at levels not seen since January in markets like the DAX Futures (next target gap resistance at 7342.5), the FTSE 100 Futures (there’s an upside gap at 6337.5) and the S&P 500 Futures (with another gap at 1451.20 that we’re targeting).

In the meantime the “hot” story right now is Oil, which is making new all time highs almost by the day. Goldman Sachs came out with a target of $200 for a 6 month to 2 year view. This was the same chap that targeted $100 a few years back which was met with guffaws at the time. Say no more.

Technically there’s been very little in the way of sell signals in Oil in recent years. At FuturesTechs I think we’ve been Bullish more or less non-stop since $30!!

Our next short term target area for the ICE Brent Crude Oil contract is £123.37-65. We use Elliott Wave projections to come up with these targets.

Gold and Silver are getting close to giving fresh sell signals so we’re watching this situation closely.

Our sell trade in Soybean Futures hasn’t gone exactly to plan although we are yet to close above our stop level of 1305.

Hope you’re having a good week, and if you’re in the UK I hope you’re enjoying this bout of fine weather!!

Cheers,

Clive.