FuturesTechs Blog

2012 has started well for equity investors as January has seen gains across the board. A standout performer is the Dax which has gained 10.9% YTD as of the close on the 26^th January. Mainstream financial media would have you believe that the ESM, EFSF, ECB’s SMP, QE 1 and 2 (3? around the corner) and various other three letter acronyms (TLAs) created by the establishment have rescued capitalism and the financial system from sure disaster. Undoubtedly an exceptional amount of liquidity has been made available to financial markets and as a result asset classes have been boosted, but as a Technical Analyst there are signs that particular markets may be due for a pause.

Yesterdays blog post included the FTSE Index approaching a significant Fibonacci retracement and testing a trend resistance line as shown below (Click on the picture to enlarge it)

Today we highlight a similar situation in the DAX (Click on picture to enlarge it)

The chart shown is the Dax Future and highlights the recent rally approaching resistance. An old trend line which has proven both resistance and support, and the 61.8% Fibonacci Retracement level of the July ’11 to September ’11 bear move are both being tested during this weeks price action.

The Dax has a particular relationship with the 61.8% retracement and often provides critical points of consolidation and often reversals. In September ’11 the Dax consolidated around the 61.8% retracement of the 2009 -2011 bull market and whilst the popular press and general consensus continued to call for lower prices the Technicals indicated a reversal was due, which I highlighted vehemently in our reports and in a special webcast. Another worrying sign is the lack of volume attributable to the gains seen so far this year suggesting the weight of ‘Real Money’ is unwilling to partake in higher prices, making them less sustainable.

So while the general consensus is for higher prices supported by unlimited liquidity from Central Banks worldwide, the Technical Outlook suggests the bigger picture Risk/Reward doesn’t favour the bulls.

Please navigate to the relevent buttons above to request a Free Trial of our reports, which cover all the major Equity Indices as well as Bonds, Commodities and Forex.

Liam Roberts MSTA

We are pleased to announce that our ipad/iphone App is now available to download from the App Store (simply search for “Futurestechs”).

We would like to invite you (client or otherwise) to download the App.

We are running a 2 week Free Trial Period when you can look at all the reports (After that access will be limited to 1 “sample” report per day).

We would ask that you pass this e-mail on to any friends or colleagues who you think may be interested.

Also any reviews of the App would be most helpful and appreciated, so if you like it please take the time to add a review to the App store.

As you can see from the screen grabs below (click on them for a full size view) the reports look really good on the ipad and, thanks to our friends at wordflow, navigating around the App and finding the reports you want is really easy.

Anyone who decides to subscribe will also be given free access to our Website Member’s Area (in case the kids are hogging the ipad!!) where all the reports are also posted daily.

Cheers,

Clive.

In Brief: All I keep hearing at the moment is how we will have a 10% correction, so, let’s have a look:

The “funnymentalist” community, particularly Stateside, seem pretty happy with the idea that this pullback will be a “normal” affair and will pull back 10% from the January highs, at which point you can happily pile in, buy the dip, and carry on where we left off…

I thought it would be useful to know where this level is on the markets we watch. So here goes, and we’re looking at the Cash Indexes here, NOT the Futures:

Dow: High was 10730. 10% pullback level is 9657 (currently 10023)

S&P 500: High was 1150, pullback level is 1035 (at 1065 right now)

NASDAQ: High was 1897, pullback level is 1707 (1743 now)

DAX: 6094 was the January high, 10% off that is 5485.  BROKEN

FTSE: 5600 high, 5040 is 10% pullback. 5033 was last week’s low, so holding…

Eurostoxx: Pulled back from 3044. 10% back from here is 2740. BROKEN

CAC: high was 4088, so 10% back from there is 3680, BROKEN.

So to summarise,  if anyone stateside says to you about 10% pullbacks the simple thing to say is “thanks, but we’re already beyond that!”… especially if/when the FTSE breaks 5030-40.

Keep safe in these markets.

Apologies for not posting any Blogs of late. The current market conditions have made for a busy time at FuturesTechs towers!

I’ve said a few things on today’s reports that don’t usually appear in our comments. Things like this from the Bund report:

We are watching these markets very carefully right now as there is a confluence of events that suggest things may be changing. We don;t often start talking the funny-mentals, and we don’t often worry about relationships between markets, however close they may be. But I’m going to make an exception in this instance.

Price action in Oil is probably tantamount to the whole thing. Western economies are on the brink of recession, triggered by the Credit Crunch, but exacerbated by the soaring price of Oil. The Central Banks are meant to raise rates in response to rising inflation, but the current rise in inflation is nothing to do with people over-spending. Far from it. If Central Banks raise rates on this basis it will be disastrous.

We need Food and Energy prices to come down to take the inflationary pressure off.

So now we turn to our charts:

Just looking at the contracts we cover here at FuturesTechs we see the following:

Corn is well off it’s highs. We topped out at 799.2 in June. As I write this we’re trading 625. Pressure off.

Wheat’s all time high was set back in February. The recent high/failure was bang on a Fibonacci retracement level. So that’s going down as well.

Soybeans only topped out in early July and so far haven’t taken out any really big supports on the way back down, although price action in recent days has totally favoured the Bears.

Brent Crude Oil has dropped from a high of $147.50 on July 11th to 129.66 on Friday. We have posted a “Three Black Crows” Candlestick reversal pattern; a significant reversal. That was last Tuesday, Wednesday and Thursday (15th, 16th, 17th July). On Friday (18th July) and so far today (21st July) price action has favoured the Bears (Dolly could spoil the party, though).

So Ags are well off their highs and Oil has had a reaction lower that’s like nothing we’ve ever seen before. At the same time Bond prices are selling off hard (the “flight to quality” trade unwinding) and Equities are staging a recovery.

Most are calling this a “Dead Cat Bounce” (a rally in a Bear market that doesn’t last long!), but when you factor in everything else we’ve just highlighted you start to at least ponder this: Is the worst of the bad news over? Are we “all done” with this sell-off? One thing that favours this is the negativity of the popular press. You know things are about to turn when you can’t find a single bit of good news in the press, and I put the business pages down yesterday morning because it was putting me off my breakfast!!

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.

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.

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 of our 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.

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.