FuturesTechs Blog

$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!!

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 posted a large red candle yesterday in ICE Brent Crude Oil and if you combine the 9th and 12th May on the Daily Candlestick Chart you get a Bearish Engulfing Pattern. Does this means we’ve seen a top? Hang on a second! The phrase “One swallow doesn’t make a summer” springs to mind!

If anything a bit of a pullback in Brent Crude and NYMEX Crude wouldn’t do any harm to the Bulls, as it’s not healthy to go up in a straight line. The buyers are bossing things right now and we don’t think any pullbacks will last long (4 days of weakness at the end of April were taken back in just 2 sessions).

On the other hand Equity markets look like they’re struggling, and the old adage of “Sell in May and go away” is being rolled out left right and centre.

The “full version” of this phrase is “Sell in May, Go away, come back on St. Leger’s Day”. St. Legers day is a horse racing festival in September, by the way! (It’s held in Doncaster, a place that will be feeling rather down in the dumps come September because they’ll still be playing League 1 football after Southend United beat them in the Play-offs this Friday).

I digress! Back to Equity markets: The Eurostoxx 50 Future is one of our favourite benchmarks. It’s a great contract to trade, with lots of volume, decent enough volatility, and no horrible periods of illiquid trade. We have broken trend support in this one today (13th May) and if we close below 3760 we’ll look for further weakness going forward. 3674 is our first target to the downside. Once we get through here 3545-75 is the next area of support to target.

We are planning to try out adding a few Individual Equity recommendations to the members area of our website, including daily technical analysis on Vodafone (far and away the most actively traded stock in the UK) and a “pick of the day” from elsewhere in the FTSE 100.