Spread Betting Central Feed

Weekly update on FTSE 350 sectors

Sat, 13 Mar 2010 00:00:00 GMT

Here is the weekly update on FTSE 350 sectors that pass 5 tests to give me either a long or a short bias (for long bias relative strength out performance, above 200 MA, Kagi in Yang mode, MA combination in up trend, 3 line break chart positive; short bias is opposite).

Out of 39 sectors 13 give me a long bias, none give me a short bias. Note this would not prevent me taking a counter trend short trade on an index, but it does, for me, rule out going short on an individual share. Also note, individual stocks within the sectors also have to pass the same 5 tests, plus I wont look at any stock outside the FTSE 350.

The 13 sectors with a long bias are:
Chemicals
Construction
Electronic and electrical equipment
Forestry and paper
Industrial engineering
Industrial metals
Industrial transportation
Mining
Oil equipment
Personal goods
Software
Technology hardware
Travel and leisure

Weekly update on FTSE 350 sectors

Sat, 06 Mar 2010 00:00:00 GMT

For the paramaters of this filter, see earlier blogs.

Sectors where I have a short bias: Alternative energy

Sectors where I have a long bias: Aerospace and defence; Chemicals; Construction; Electronic and electrical equipment; Forestry and paper; Health care; Industrial engineering; Industrial metals; Mining; Personal goods; Software; Technology hardware; Tobacco; Travel and leisure

There are a total of 39 sectors, short bias 1, long bias 14; neutral 24

Seminar 27th March, couple of spaces available

Sat, 27 Feb 2010 00:00:00 GMT

The next whole day seminar on spread betting is on 27th March, and there are a couple of spaces available - attendance is capped at 12.

The course material has been recently updated and the February seminar received great feedback.

Unfortunately the earliest I am able to run another one after March is June 12th.

Each seminar is adapted to reflect the learning objectives of the attendees. Topics covered include:

Set up and resources for spread betting - shopping for the best on the market
Markets and products available - pros and cons
Account operation, practical issues, street wisdom, share experiences
Using technical analysis for market overviews, entries, exits, determining bet size
Strategies for trades, generic ingredients, specific strategies for different markets
Risk control, methods and techniques
Planning and monitoring, approaches and techniques
Developing a winning attitude, continual development

To find out more or to book a place, go to http://www.sparkdales.co.uk

Weekly update on FTSE 350 sectors

Fri, 26 Feb 2010 00:00:00 GMT

Feedback is that people find this analysis useful, so I will continue to publish it - I use it as a filter for my own trading.

Just a quick reminder of the criteria for the analysis:
to have a long bias in a sector the sector needs to pass 5 tests:
relative strength >5% versus market; price above 200 day moving average; Kagi in Yang mode (bullish); 3 line break chart in up trend; 13-26-52 moving average combo in up trend

To have a short bias in a sector the sector needs to pass 5 tests:
relative strength <5% versus market; price below 200 day moving average; Kagi in Jin mode (bearish); 3 line break chart in down trend; 13-26-52 moving average combo in down trend

There are 40 sectors in total - I am neutral on 23.

Bullish bias on twelve: Aerospace and defence; Chemicals; Electronic & electrical equipment; Food producers; Forestry and paper; Health care; Industrial engineering; Industrial metals; Non life insurance; Personal goods; Tobacco; Travel & Leisure

Bearish bias on five: Alternative energy; Financial services; Fixed line telecoms; General retailers; Real estate investment trusts

Just to clarify if I am trading UK stocks I wont look at any in the neutral sectors. To go long both the sector and the stock itself has to pass the five tests for bullish bias; to go short both the sector and the stock itself has to pass the five tests for bearish bias

FTSE 350, Sector Analysis

Sun, 21 Feb 2010 00:00:00 GMT

The sectors in an up trend per criteria listed in earlier blogs, and which have outperformed the market by 5% or more in the last three months are:
Aerospace, Electricity, Electronic equipment, Food producers, Health care, Industrial metals, Non life insurance, Personal goods, Tobacco, Travel & Leisure.

The sectors in a down trend, and which have underperformed the market by 5% or more in the last three months are Financial services, Real estate investment trusts

Ladbrokes and spread betting

Thu, 18 Feb 2010 00:00:00 GMT

The more big firms enter the market for spread betting in principle the better that is for us punters. More competition for our business, leading over time to better spreads, better services and a more robust trading vehicle.

So I see the latest news below as a good development.

"Worldspreads Group says its UK subsidiary Worldspreads Limited has signed an exclusive deal with Ladbrokes to provide its financial spread betting service to Ladbrokes' global customers.

Under the terms of the new partnership, Worldspreads will provide an online trading service, which will offer financial spread bets on market instruments such as stock exchanges, individual shares, currencies, commodities and interest rates."

S&P 500, how far will it retrace?

Thu, 18 Feb 2010 00:00:00 GMT

Generally, how the S&P 500 index performs has a knock on effect on other indices such as FTSE 100.

So the key question at the moment is how much of the big January / February fall is it going to retrace?

The index peaked at 1150.4 on 19 January, and then fell powerfully until 5 February, which saw a low of 1044.5. A fall at its maximum of 105.9 (over 9%).

It is common for powerful falls like this to retrace between a half and two thirds. And Fibonacci fans like to look at other retracement levels such as 61.8%.

With the high of Wednesday 17 February reaching 1101.0 the 50% retracement level has already been achieved (1097.4), so the next two of interest could be the 61.8% retracement (1109.9) and the two thirds level (1115.0).

One scenario now is that we see a little more upside and then the retracement peters out somewhere between 1101.0 and 1115.0, leading to further declines at least testing the low of the recent decline.

Another scenario is that we see a 100% retracement of the decline, and that old January high of 1150.4 gets tested again.

The price action over the next three or four days will provide us with clues on further developments, in particular it is important to see whether the retracement can push as high as 1115.0, or if it loses strength before then.

FTSE 350, sector analysis

Mon, 15 Feb 2010 00:00:00 GMT

A couple of traders I know are using the Japanese technique of Three Line Break Charts, which they consider to be similar to but superior to point and figure techniques.

I have analysed the FTSE 350 sectors to give a directional bias to any overnight trades I might be considering. The sorting criteria I have used are as follows:
For upward directional bias I require the 13-26-52 moving average combo to be in up trend mode, price to be above the 200 MA, 2% Kagi to be in Yang mode, Three line break chart to be in up trend mode, and the sector to have outperformed the FTSE 100 by at least 5% over the last three months. For down directional bias I require the 13-26-52 moving average combo to be in down trend mode, price to be below the 200 MA, 2% Kagi to be in Yin mode, Three line break chart to be in down trend mode, and the sector to have under performed the FTSE 100 by at least 5% over the last three months.

Here are the sectors where I have an upward directional bias: Health Care; Non life insurance; Technology; Tobacco; Travel and Leisure.

Here are the sectors where I have a downward directional bias: Automobiles; Banks; Financial Services; Fixed line telecommunications; General Retailers; Life Insurance; Real estate investment trusts.

FTSE 100, changed picture

Mon, 08 Feb 2010 00:00:00 GMT

An instrument can be be both trending and non trending, depending what timescale one looks at. An instrument can also be in an up trend on one timescale and a down trend on another.

Quite recently I commented that on the FTSE 100 weekly charts the 4 - 10 - 40 moving average combination was still in uptrend mode, although at that point in time some shorter timescales were registering down trends. The action over the last couple of weeks has now knocked the 4 week moving average velow the 10 week, so following the methodology of my second book, that moves the index into sideways mode.

Some indicators however on the daily charts are now showing the index in down trend mode. The 14 day ADX has hit 25 and is rising, with DI- above DI+. The 2% Kagi chart is in Yin mode. The 13-26-52 moving average combination is still in sideways action, but another week of falls would put it into down trend mode.

FTSE 350, sector analysis

Mon, 08 Feb 2010 00:00:00 GMT

Whatever direction (if any) the overall stock market is going in there can always be trends either in the same or the opposite direction when you look at the sectors within the market.

Each week I like to get an overview of how these sectors are performing.

For instance, this weekend I used the following criteria in an analysis.

For outperforming sectors still in an uptrend:
sector out performance over the last 3 months over 5%
Kagi 2% in Yang mode
sector index over the 200 day moving average
13-26-52 moving average combination in up trend mode.

The following sectors passed this test:
Electricity; Technology; Tobacco; Travel and Leisure.

For underperforming sectors in a down trend:
sector under performance over the last 3 months greater than 5%
Kagi 2% in Yin mode
sector index below the 200 day moving average
13-26-52 moving average combination in down trend mode

The following sectors passed this test:
Alternative Energy; Banks; Financial Services; General Retailers.

Any overnight trades I look for will respect this analysis, so for instance I would not look to go long any General Retailer stock, I would only look to go short in that sector.

Trends

Thu, 28 Jan 2010 00:00:00 GMT

There is a well known trading slogan, which is "the trend is your friend". But of course the trend depends on the timeframe. For instance, an instrument can be in a up trend on the weekly chart, a sideways trend on the daily chart, a down trend on the 30 minute chart and an up trend on the one minute chart.

The ADX readings for the 7 instruments we track on this site are all currently below 25 (using the standard 14 day setting) and this is often associated with sideways markets.

But moving to a longer timeframe, the situation is different. One of the tools I use to identify trends is a set of three moving averages, and on the weekly charts I use 4 10 and 40 weeks, looking for how the three averages are aligned in respect to each other. The 4 above the 10 above the 40 is defined as an up trend; the 4 below the 10 below the 40 is defined as a down trend; everything else is defined as a sideways market.

On this timeframe using this tool two of the three currency pairs we track are all sideways markets currently (Sterling Dollar and Euro Dollar) and the third, Dollar Yen, is in a downtrend. Gold, FTSE 100, FTSE 250 and S&P 500 are all in up trends, but all are close to moving into sideways markets since in each case the 4 week moving average is only just keeping its place above the 10 week.

20th Feb seminar full

Fri, 22 Jan 2010 00:00:00 GMT

The seminar I am running on spread betting in London on 20th February is now full. An additional one is being organised for March.

Seminar organised for 27th March

Fri, 22 Jan 2010 00:00:00 GMT

My next whole day seminar on spread betting with available places in being held in London on 27th March. Attendance is always capped at 12 plus myself to encourage maximum participation. To register general interest, or to book a place, go to www.sparkdales.co.uk

Topics covered include

Set up and resources for spread betting - shopping for the best on the market
Markets and products available - pros and cons
Account operation, practical issues, street wisdom, share experiences
Using technical analysis for market overviews, entries, exits, determining bet size
Strategies for trades, generic ingredients, specific strategies for different markets
Risk control, methods and techniques
Planning and monitoring, approaches and techniques
Developing a winning attitude, continual development

Members forum - threads by users of my DVD

Thu, 21 Jan 2010 00:00:00 GMT

Just a reminder for everyone who has my DVD and is actively trading the TDS and T+DS strategies, you are strongly recommended if you havent yet done this to follow the registration procedures to access the Member's area of the forum on this site (provided with the DVD).

Here are some of the articles on the DVD which have been posted recently by people trading the strategies:

Creating your own rules sets for trading TDS

Success

TDS qn re entry requirements

TDS qn re spread adjustment for targets

TDS and market classifications

TDS

Looking at past Kagi history

Contingency plans

Mon, 18 Jan 2010 00:00:00 GMT

The recent snow was quite severe in my area, and at various points the phone line we use for our internet connection went down.

An additional relevant factor is that the mobile signal is not strong enough to receive data via a dongle.

I think every trader should have a set of rules to cover loss of internet connection, both for new trades and existing trades.

I have an incredibly simple set of rules, which form part of the contingency plan section of my 2010 -2011 trading business plan (an 82 page document).

The rules say I cant trade if there is no internet connection: no new trades, and exit all existing positions.

So that is what I did, and had to wait several days for the line to be repaired.

You might consider that quite a drastic step, and you might have rules that say that no new trades, but keep existing ones with a stop and limit order to exit, for instance. The point is not so much what the rules are but rather that this particular contingency has been thought about in advance, and the rules are documented.

FTSE 100, attempting break above 5400

Mon, 04 Jan 2010 00:00:00 GMT

A series of higher highs and higher lows which represented a strong up trend in the FTSE 100 reached a high just below 5400 on 16 November (5497). A consolidation period followed after this, with the price action forming a triangular pattern, lower highs and higher lows.

Price broke out of this consolidation pattern on 23 December, with price closing above a trend line connecting lower highs of the consolidation. Further potentially bullish action was seen on 29 December in the form of a gap, where the lows of that day were higher than the highs of the previous trading day, and price has closed above 5400 every day since 24 December.

However the follow through since the gap day has not to date been convincing, with two black candlesticks forming on the two days following the gap, and price yet to close above the close of the gap day, 5438.

In traditional technical analysis there are four classifications of gaps, one of them being called an exhaustion gap, the last excited jesture of the bulls or bears at the end of a trend, shortly after which the trend ends.

After an upward break of this kind, all eyes are on the bulls. Have they the staying power to follow through on the break out, will they be able to push prices well beyond the close of the gap day? Or will, with hindsight, that gap turn out to be an exhaustion gap?

FTSE 250, still in consolidation

Mon, 04 Jan 2010 00:00:00 GMT

When looking at the FTSE 100 price action it is also interesting to see how the FTSE 250 has been behaving. The FTSE 250 like the 100 was in a powerful up trend, with higher highs and higher lows; but whereas the 100 reached a peak and then went into consolidation on 16 November, the 250 peaked earlier, reaching a high of 9591 on 15 October, before entering a period of consolidation. The price action of the 250 during this consolidation also has a triangular appearance, with lower highs and higher lows, however unlike the 100 the 250 has yet to break out of its consolidation. It is quite close to a trend line drawn across the peaks of the consolidation, however a break up has not yet occurred.

The FTSE 250 contains the next 250 stocks after the FTSE 100 in capitalisation, ie those ranking 101 to 350, which include more volatile and riskier investment vehicles, so the failure to break out to date suggests that some investors have started to lose their enthusiasm for the more risky assets. Whether or not the 250 does break out is a further piece of evidence for assessing the robustness of the 100 break out.

Gold, significant correction

Wed, 16 Dec 2009 00:00:00 GMT

Between February and September of this year Gold was in a wide trading range with the top of the range being around 1000. In early October we saw a decisive break above 1000, and this led to a powerful up trend, which on 3 December saw prices rise above 1200. Since then we have seen a significant correction back down to the 1100 level.

This correction has knocked the ADX indicator out of up trend mode, both on the 8 period and the more traditional 14 period settings on the daily chart. However some of the other tools I use are still showing an up trend, including the 13 26 52 day moving average combination (based on typical price) and the 2% Kagi chart based on daily closes, and the 4 10 40 week moving average combination.

An instrument can and often will be in an up trend on one time frame and a down trend in another (for instance an intra day chart).

Euro Dollar failed break leads to falls

Wed, 16 Dec 2009 00:00:00 GMT

We recently noted the failed break above resistance. As if often the case this failed break has led to significant falls, with price moving from above 1.51 to below 1.46.

In the process price has also broken the sequence of higher highers and higher lows, by falling below the of the previous pullback. The expansion in volatility has caused the Bollinger bands to expand, and price has been riding the lower band.

Anyone using the false break out as an opportunity to go short will have done well, and now the issue is to ensure that profits are locked in, possibly through a trailing stop mechanism.

S&P 500 volatility contraction

Tue, 08 Dec 2009 00:00:00 GMT

We have been watching the S&P 500 index wrestling with resistance around 1100 since mid October. Since November 16 we have seen a tight range with prices fluctuating between 1084 and 1119.

For those that use Bollinger bands (a great tool, and I thoroughly recommend the book by John Bollinger, aptly called Bollinger on Bollinger bands) the Bollinger bands are now contracting to the point where the distance between the upper and lower band is the smallest for the last six months. The bands are a measure of volatility, and so this tool is telling us that volatility has reached the lowest point in the last six months.

The theory is that volatility is cyclical, and that low volatility leads to high volatility, and vice versa. It is reasonable to expect that the current low volatility will lead to much higher volatility.

All this is suggesting that we are seeing a lull before a storm. Sooner of later we are likely to see an increase in volatility as price moves out of this tight range. John Bollinger points out that more often than not there is what he calls a "head fake" where price moves one way after a period of low volatility, then turns rounds and heads back the opposite way. This may or may not happen in the case of the S&P 500, but it is with the odds that once price breaks out of the current tight range there will be volatile move away from the range.