An in-depth look at Spread Betting Index Trading.
Spread Betting Index Trading
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Spread Betting on Indices - 5 August 2011
We are now at panic stations as last night the Dow Jones just fell and fell and then kept on falling.
Many other indices are nursing heavy losses for the year and others are in a technical bear market having fallen over 20% from their highs.
US and European indices spread betting markets are perilously close themselves to that technical condition. The Dow is 12% lower than its May peak, the FTSE is 15% off its highs and the Dax is 17% a whopping lower.
All these markets have now buckled below their May lows and the move is reminiscent of the market crash in 2008 where indices simply had run out of steam in the latter part of 2007, before spectacularly diving.
2011 has seen indices struggle to make ground and now the big shake out is making investors very nervous that there is more carnage around the corner. This week has seen these indices wipe out a yearís worth of gains, a scary thought to think that 365 days of hard work can be gone in just 5.
The indices spread betting markets were hardly helped by the ECBís announcement that they were to start purchasing government bonds again in a bid to quell the turmoil.
Initially the comments were taken well and so bond yields dropped, but then it was apparent that they were only going to buy Irish and Portuguese bonds, so the yields quickly reversed themselves. Investors are clearly asking the question of why itís not Italian or Spanish bonds, which are the ones everyone is focusing on at the moment.
In a decidedly less hawkish statement from the ECB yesterday there was also fear that their previous two rate hikes have come at the worst possible time. I wonder if Trichet isnít slightly regretting the action he has taken up to now, wishing he could reverse the decisions, but hindsight is a wonderful thing and such a move would only cause further panic.
So the FTSE is off 150 points or so and our spread betting account holders canít seem to stop buying it, only moments later to be stopped out.
Those clients who are long must be praying that todayís Non Farm Payroll will come in way above expectations. One thing is for sure that with investors being so incredibly nervous at the moment, 13:30 London time today is likely to be very volatile.
Perhaps the best thing clients can do is to sit tight rather than trying to trade over the biggest economic data release in the calendar.
Spread Betting on Indices - 4 August 2011
The last few days have been tumultuous to say the least and clients have been finding conditions tough, really tough in fact.
Many traders have been buying into the dips hoping for a rebound but being stopped out soon after.
The increase in volatility is providing excitement and attracting punters to the spread betting markets in an attempt to capture big moves in a short space of time. The problem is that where volatility might provide opportunity it can also burn your fingers.
From a technical analysis point of view, markets look to be breaking down and doing so in rather spectacular fashion by smashing through support levels.
At the moment mild panic seems to be setting in and, whilst there has yet to be a mad rush for the exit, there's a feeling that investors are treading on thin ice. If the ice breaks then there really could be an even bigger move to the downside.
It's all doom and gloom for the spread betting markets at the moment, but at least this morning things look just a little bit better after US markets recovered slightly from their lows.
The FTSE is back above 5600 on the open but whether this little bounce can be sustained or not in order to avoid the index's fifth decline in a row is another question.
In order to turn things round for the indices spread betting markets we're going to need something spectacular from tomorrow's Non Farm Payroll. For today we have the BoE and ECB rate decisions where little is expected.
Spread Betting on Indices - 3 August 2011
The FTSE has fallen to new lows for the year as investors remain concerned about the global economic recovery.
Yesterdayís falls were enough to make even hardened investors nervous and now many are worried that there could be more declines to come.
So the FTSE is being dragged down to the mid 5600 area which, for the moment at least, seems to be providing a little bit of support.
Near term support is seen at this morningís lows around 5620 and then 5570 and 5460 with upside resistance seen at 5750, 5810 and 5845.
The more worrying thing from a technical analysis point of view is the break below the major upward trend line through the 5750 area. This was the trend line that had been in tact ever since this bull market commenced in March 2009.
Major downside targets over the longer term now are 5440 and 5245 which might seem a way off but a couple more days like yesterday and we could be down there.
Spread Betting on Indices - 2 August 2011
Even though two of the major issues dominating financial markets at the moment have been put to one side, investors remain cautious about the outlook for the global economy.
Yesterdayís sharp correction is definitely a cause for concern as the spread betting markets donít usually react to a PMI number so significantly.
The fact that both the UK and US manufacturing surveys dipped to lows not seen since the recession spooked investors. The focus is well and truly on the macro, as it has been for most of the year, and itís the global outlook which is dominating the minds of market participants.
Many investors and fund managers will tell you that stocks on the whole are cheap when you look at their 5 year earnings average. However, with so much uncertainty about where inflation, unemployment and growth will be in a yearís time, it is difficult to get excited about the shares spread betting markets.
Throughout 2011 growth forecasts have been downgraded and in the past few months confidence surveys have been dipping so that means that things are starting to look tough.
Itís not just developed economies either, but the engines of global growth such as emerging and Asian markets, in particular China, the sleeping dragon which seems to be going back to sleep.
Already pressure is on the FTSE as it commenced the day flat but it didnít take long at all before the sellers have taken us lower to 5750.
This is perhaps because European indices spread betting markets had a much worse day than the FTSE yesterday. The Dax and Cac lost 2.9% and 2.3% respectively so the FTSE might be playing a bit of catch up this morning.
A break below the 5740/30 area would be seen as relatively bearish and we could see a move towards the 5650 area before too long.
Our spread betting account holders are bullish though, having been buying into this weakness expecting a bounce similar to when the market has bounced from its lows throughout this year.
Spread Betting on Indices - 1 August 2011
It would seem the US politicians have finally banged their heads together in order to come to some sort of deal. This has given investors a bit of relief to kick off the new week and month.
To think that it has taken this long to come to a compromise after months of talks, but then thatís what you get with a coalition administration, which is affectively what the US has.
But the spending cuts announced barely scratch the surface and once again we see a half-hearted approach that will do little to address the ever increasing debt burden.
Real austerity comes in the form of what the Eurozone periphery is having to impose on their countries which includes spending cuts and tax hikes.
Of course no one like raising taxes and such action goes straight to the heart of the consumer which is the driving force of the US economy. However, to get the house in order drastic measures are needed.
If the plans are passed by the Senate and Congress then thatís all good and well, but stiffer medicine will have to be administered later down the road.
The spread betting markets are in relief rally mode with risk assets doing well and pushing higher.
Spread Betting on Indices - 29 July 2011
The clock is ticking and time is well and truly running out.
It is amazing to see that financial spread trading markets haven't started to go into complete meltdown considering the ramifications of a default or downgrade to US debt.
So as we approach the weekend it would seem that investors still expect some sort of deal, with at least a minimum rising of the debt ceiling so as to avoid gridlock in the credit markets.
That said the FTSE's Herculean effort yesterday to recoup all its losses from the morning causing it to put is a half decent gain is being wiped out today. This morning fear is definitely starting to creep in and even the bonds spread betting markets are getting a little nervous as yields start to head higher.
Time really is pressing and next Tuesday is only a couple of days away if you take the week end out of the equation.
This week has seen the stock market indices drift sideways, to slightly lower. With so much going on and so many variables to consider, it's really hard to say that equities are a good place to put your money, no matter how many people say that overall they look cheap.
Spread Betting on Indices - 28 July 2011
Markets are being left in limbo as wranglings between the Democrats and Republicans over a deal to raise the US debt ceiling continue.
This is proving to be the main driving force within the financial spread betting markets at the moment and it isn't making the going good for the bulls.
If the US were to default it would cause untold damage to the financial markets. It wouldn't only be US citizens who would suffer from seeing public services shut down, social service cheques not being sent our and parks being closed.
Such a credit event would ripple through the credit markets causing borrowing costs to spike as a result of an inevitable downgrade to the US's prized triple A credit rating.
Banks, investment funds and even governments that have exposure to US debt may not get repaid, further compounding their own funding woes, causing the ripple to turn into a rather larger wave.
Despite all what could happen if such a default were to occur, interestingly the bonds markets are not at panic stations just yet and the US bond auctions so far this week haven't been a disaster.
If the bond markets don't seem so concerned, why are the equity markets getting the heebie jeebies? Even after the close last night FTSE futures continued to sell off and took down to almost as low as 5800.
This morning things are still just as bad as they were after the market closed yesterday. We've been calling the market to open lower by some 50 points around 5800 throughout the night and we've commenced the session today just above there at 5810.
Spread betting and CFD trading carry a high level of risk and you can lose more than your initial deposit so you should ensure spread betting or CFD trading meet your investment objectives and if necessary seek independent advice.
Market Commentry from Financial Spreads.
Financial Spreads - tax free* trading on over 2,500 spread betting markets. With a Financial Spreads Account you can trade commission free, 24 hours a day on stock market indices, forex, shares commodities and...read review » Financial Spreads.
With financial spread betting you can lose more than your original stake or investment. Spread betting carries a high level of risk to your capital. Please familiarise yourself with the risks that are involved and before trading, ensure that financial spread betting matches your investment objectives. Seek independent advice where necessary.
Spread Betting Index Trading - edited by MJ, 05 August 2011.
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* Based on current UK tax law. Tax law may change and can differ depending on your personal circumstances.