FuturesTechs Blog

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.

The brave new world for FuturesTechs is welcoming new traders into the fold. Whereas we’ve traditionally catered for Professional Traders and Brokers, with our new “per end user” website we can now be accessed by a wider audience.

But a question we’re being asked quite a lot by new subscribers is “What is the Bund?”, amongst other things! (Bobl, Schatz, Euribor, Short Sterling, GasOil, to name but a few!).

We have been writing Technical Analysis in the Bund Future right from the start. It is one or original reports from 2000 when we first set up. It has an interesting history actually, because Bunds were traded on the LIFFE Floor until about 1999, at which point they suddenly migrated to the DTB, now called Eurex, which was one of the early pioneers of Electronic Trading. As it was one of the biggest Futures contracts in the world at that time (and still is today) this was quite a coup, and can be classed as the death knell for Floor traded Futures, not just in London, but around the world.

As I said above the Bund Future is one of the biggest contracts in the world, regularly trading over 1 million lots per day. It is the benchmark for 10 year Bonds in Germany. Even though Europe “became one” in 2002 the financial markets, still to this day, reference the Bund for transactions in the European money markets.

The 5 year Bond Futures is the Bobl, and the Schatz tracks the 2 year part of the curve. All three trade very good Volume each day and are excellent contracts to look at if you are accessing the market directly. By definition the shorter dated contracts have less volatility.

When choosing a contract to trade (direct to the market as opposed to Spread Betting) Volume and Volatility are the two things you need to look for. Volatility is specific to your needs: For some people the DAX Future is a rampant animal that they would never dream of trying to tame. To others it’s a perfect challenge and the Volatility is welcomed.

But Volume is important because you need to be able to get out of a trade if it’s going against you, and if you trade something that’s very thin you may have trouble doing this.

So to new visitors of our Members area I urge you to have a look at these products and discover if there’s something there that suits you.

Most spread betting firms have quotes for these contracts, and the spreads will likely be reasonably close, because one of the things the Spread betters base the size of their spread upon is their ability to “trade the other side” if they want to.