FuturesTechs Blog

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!!!

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!!

We have had our web offering up and running for a few months now and we’ve been speaking with plenty of private traders of all different levels of experience. We have heard a few stories of people losing lots of money, and still not really feeling that they’re swimming above water.

Many of these people got signed up to training seminars that are advertised with lines like “make £50,000 a year for just 10 minutes work a day”. And there’s our first “tip”: Does that sound too good to be true? What do they say: “If it sounds too good to be true, it probably is!”. Come on! You’re intelligent people. Also if you see someone trading a “live” trading system, make sure it is live. And think about this: If I had a trading system that was whiz-bang nailed on money making and amazing, would I tell anyone about it?

Now consider this: There is a school of thought that 80% of traders who Spread Bet lose money. There is another school of thought that Spread Bet firms move the market to where your stop is and knock you out of trades. Are you sure? Most spread bet quotes are based on the underlying index. The spread bet firms’ highs and lows are matched to the underlying almost to the tick. So they’re not moving the market up and down to try and trigger your £2 stop. Please!

There are some very important disciplines you need to exercise before you start trading. Here are just a few that I can think of off the top of my head.

Start off small. Why give away all your money while you are learning to trade.

Understand and utilise Risk/Reward. Whenever you put a trade on make sure you’re aiming to make more money that you’re prepared to lose. If you always do this then you can lose as many time as you win, but you’ll still make money. If you try and make three times what you’re prepared to lose (known as a 3;1 Risk/Reward ratio) then you can have 7 losing trades out of 10 and STILL make money. Technical Analysis is the best tool for working out when you are putting on a trade with favourable Risk/Reward.

Never bat against a strong trend. Why do people feel the need to try and buy something that’s falling like a stone, or sell something because it’s really strong? This is one of the biggest mistakes new traders make. Don’t try and trade against a strong trend. We look for Candlestick patterns to suggest trend changes, then wait for confirmation. We saw a Hammer on the FTSE Futures chart last Wednesday, but it wasn’t until Friday that we started believing there was more upside to come. Even now we’re not getting too carried away, and have reasonable upside targets, because the Bears could wake up at any minute.

We are currently looking for the recent pullback in Oil to do a bit more. But we’ll soon change our minds if the positive candles start to appear, and the smart money will be made by getting long once this happens and riding it back to $147.

Find one thing to trade (at a time) and learn it’s personality. Different markets behave in different ways, and you may need to spend the early months discovering a market that suits you. You will all have different approaches to risk, volatility and the like. You will also have to skew the type of product you’re looking for towards how much time you can devote to it. I would suggest that something like the DAX Future or the S&P 500 would require a lot of attention, whereas something slightly less volatile may suit those who don’t have time to watch it’s every move. Yuo may need to try a few different things before you find something that appears to work for you.

Be well capitalised, and don’t risk it all on one trade. There is no point trying to turn £200 into £2000. You have a much better chance of turning £2000 into £20000. With £200 in your account you run a good chance of doing your dough in the first few trades. Many firms offer a dummy account or a “training account”. Good idea. Take advantage. Press buttons. Make mistakes. Then start risking your own money once you’ve got a few of these mistakes under your belt. Once you do start trading don’t risk all your capital on one trade. This isn’t the Casino where you get your pile of chips and stick it all on red because you fancy a Gin and Tonic. This is a business (well it could be if you take it seriously).

Manage your emotions. Trading can be an emotional business, and you need to make sure you can manage or control this, otherwise you will make decisions with your heart and not your head. Many professional traders spend lots of time making sure they’re in the right frame of mind to trade. A good way of doing this is by putting together a plan at the start of each day; collating your ideas. Then you have something to refer to. You can “keep it sensible” and not allow yourself to start making baseless emotionally-driven decisions.

This is just a few thoughts that may help you along the way. I’m sure future blog posts will expand on this theme as I think it’s extremely important.

I’ll sign off with one more thought, which kind of follows on from the previous point: Have a strategy. If you’re trading is based on “I bought it ‘cos I thought it was going up” then you shouldn’t be trading. Again this is where Technical Analysis can serve a trade so well. It gives then something to reference off in the decision making process. This is what Futurestechs does for many professional traders, and what we hope to become for many more of you; a useful reference point and a good building block towards a successful trading career.

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.

Someone should buy Ben Bernanke and Hank Paulson a pair of super-hero suits, because they’ve come to the rescue again!

Back in March (the last time were down at these levels) they stepped in to rescue the markets when they were on key Fibonacci support levels… Today I’m going to post the mail I sent out to all of our professional clients and contacts at that time. You may get a feeling of Deja vu reading this:

“Anyone who looks at Dollar/Yen will know that the BoJ intervene at key technical levels. THEY LOOK AT CHARTS.

I mooted something in the Bund report this morning that may have had a few people questioning my sanity; the idea that the Fed are stepping in to hold Equities above key supports.

Let’s look at the evidence: The last big move from the Fed was the 75 bps cut in January, just when the S&P was threatening to shank through 1281.70, the 38.2% Fibonacci retracement of the March 2003 - October 2007 rally. A BIG LEVEL!

They did the same thing yesterday when we were once again back at these levels.

In terms of the medium term technicals there is a strong argument that many people will be looking for weakness to 1187.50 then 1093 if this level breaks.

The key here isn’t whether this move can or will unfold; it’s the number of people who believe the story, and if intervention means the sell trigger doesn’t come, and a solid base of support is found, then the intervention would be deemed a success.

In the Dow Futures the corresponding KEY support is 11651.

In the NASDAQ it’s 1699″

The NASDAQ has done fine since then and isn’t threatening these key levels but the Dow and S&P dipped below them last week…. and Treasury and Fed stepped in…

More tomorrow. Watch this space.

PS. Follow this link for my latest CNBC appearance. I was making a point about not needing to “pick bottoms”. It could have been any number of charts from the Banking or Building Sectors, really, so no offence to Bradford and Bingley…

Things have been a bit frantic since the last Blog post, both for myself and the markets! As well as speaking at the IX Investor Show and the Trading Symposium I have also finished the first draft of my up-coming book; “Candlestick Charts. An introduction to using candlestick charts”. I just hope there isn’t someone round at Harriman House right now pulling their hair out wondering how the heck they’re going to make it into a book!

The events were well attended and both pulled in a crowd of around 200 people to listen to my ramblings on Candlesticks.

Having spoken in front of these sort of numbers in seminars, surely today’s appearance on CNBC would be a walk in the park.

But my first appearance on TV turned out to be a rather nerve-racking experience! Let’s hope that was just because it was the first time, and let’s hope they invite me back again.

The other thing I hope is that the calls I made work out okay!

In the Eurostoxx 50 Futures I (rather nervously, with a waver in my voice) said that last weeks break of 3387 spelt trouble, especially since this level turned resistance and capped upside subsequently. This is a key line in the sand and if we can retake this level the hounds can be called off. Otherwise things still look very bleak.

In CME Group Wheat (still called CBOT Wheat by most people despite the recent merger) we’ve seen a failure at a key Fibonacci level (955) in recent days and this now looks set to head lower to retest the year’s low at 730 (trading 845 at the time of writing). I had managed to gather myself a bit by this time and was even starting to make some sense!.

Finally I looked at the Eurex Bund (by this time I was breathing normally and everything) where the short term has been a tad messy, but the Medium Term outlook remains firmly skewed towards the Bears.

Overall I think it went well, and I’m looking forward to the next time I get on there, and this time I’ll tell people beforehand. Today I was more than happy to keep it quiet!!!

Here’s a link if you want to view it…

http://www.cnbc.com/id/15840232?video=782776257

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.

$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.