FuturesTechs Blog

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!!

The heroics from Ben and Hank that I spoke about in yesterday morning’s Blog were squarely ignored by the markets. Despite the rescue of Fannie and Freddie we sold off harder than any day we’ve seen of late, just from a higher base.

We’re going to start the US session from a low base today, so will we recover? I wouldn’t bet on it, but George Bush and Ben Bernanke will do their best to say the right things again.

The FTSE 100 Future has been down to 5150 today, the lowest price printed since October 2005.

It doesn’t look like the selling is over, but we are starting to get that “capitulation” feel about things, aren’t we?

Right now it’s worth remembering two really naff phrases that often get rolled out, and in my opinion should be rolled out more often:

Naff catch phrase number 1: “The Trend is your Friend”

Naff catchphrase number 2: “Bottom pickers get dirt…” I don’t think I need finish that one.

Lastly, another one that I think is quite relevant right now:

“Denial is not just a river in Egypt”.

Have a good day and be careful.

Cheers,

Clive.

We spent Friday at the IX Investor show where there were many people that were looking into the idea of trading the markets using Spread Betting.

A question that often comes up is what to actually trade, when it comes to Indices like the FTSE and the Dow, because on most Spread betting platforms there are several choices of product.

The FTSE 100 Index (aka “the Footsie”)  tracks the country’s top 100 companies. As many of you may be aware this list changes depending on who’s doing well and who isn’t. This week Alliance and Leicester, Persimmon, Tate and Lyle and Home Retail Group all fell out of the FTSE 100. This is a reflection on how tough Banks, House Builders, Retailers and Food companies (respectively) are doing it right now.

So who replaced them? Fine British names like Petrofac and Ferrexpo joined Drax Power and Invensys.

Petro-who? I think I know what it does based on the name; and it sounds like it likes Oil at £139 a barrel! Petrofec is an Oil service company; a truly worldwide operation.

Ferrexpo is a Ukrainian mining company.

The FTSE 100 reads like a who’s who of international powerhouses these days, whereas 10 or 20 years ago it read like a who’s who of the British High Street.

Now here’s one thing to think about while we ponder the make-up of the Index: It always champions the strong and weeds out the weak.  If a company performs badly, or if they are in a struggling sector,  they can fall out of the Index.

It’s the mining companies that have been the stellar performers in recent years, and the FTSE is now chocker-block with them.  As the Banking Stocks continue to fall like lead balloons their effect on the overall index decreases. So what you’re trading when you buy and sell the FTSE 100 is very different to what you were trading even a couple of years ago.

But back to our initial concern: The different products on offer on the Spread Betters platforms.

Most firms seem to offer at least two choices, the main two being a rolling “Cash” product or the “Quarterly/Forward” contract.

The rolling/cash merely tracks the underlying Index and settles against where that finishes each night.

The “Quarterly” or “Forward”  is based on the FTSE 100 Futures and is, in my humble opinion, the best one to trade, especially if you want to use our daily reports!  We write our reports on the Futures contract, currently for expiry in September (it trades for delivery in September, December, March and June, by the way), and this is what most Spread Bet firms will be referencing their quotes from.

If you want to trade the daily rolling contracts you  would need to work out the difference between it and the Futures before you can make firm use of our levels. The Futures should trade at a premium to the underlying, and at the moment in the FTSE that’s about 28 points.

If you have any further questions feel free to contact us via the button in the Member’s Area. We always aim to help our Members get the most out of the service.

Happy trading.

Cheers,

Clive.