21st April 2017
Good morning. A pretty flat day on the FTSE 100 yesterday after the bearish start to the week. The bulls managed to defend the 7090 level but couldn’t really push on past 7125 despite 3 attempts. The gold short we had managed a few points, but the stand out performers where the US markets which rallied strongly. The Dow gaining over 200 and the SP over 20. We head into option expiry today and also the first round of the French election on Sunday.
French Election
Traders have already been grappling for several days with the “nightmare scenario”: a eurosceptic duel between the Front National’s Marine le Pen on the hard-Right and the radical insurgent Jean-Luc Mélenchon on the hard-Left.
An alternative nightmare is now coming onto the radar screen as new polling data suggests that Mr Mélenchon would win handily in a faced-off against the centre-right candidate François Fillon, who has survived a ‘fake jobs’ scandal involving his family but remains toxic for the Left.
“Almost anything is possible based on the polls. Markets still appear to be underpricing the risks,” said Athanasios Vamvakidis from Bank of America. He warned that markets will immediately start to price in “Frexit risks” if it is a Left-Right fight, triggering a “Brexit-style” crash in the euro to as low as $0.90 against the US dollar. From here
FTSE 100 Outlook and Prediction
Bit of a tricky one to call today ahead of the French elections. There are 3 main levels that I am looking at that might be worth trading off and that is support at the pivot and 30min coral area at 7112 – we might see a bounce from this level and a bit of short covering today. And then for resistance, we have a few levels of note, namely 7141 initially, then 7175 above that. I think this latter might be worth a short but as its option expiry Friday ahead of the French election it might be worth giving it all a miss or just doing small stakes (unless you fancy a gamble of course!).
I have gone for an initial rise this morning building on US strength yesterday (though the FTSE stubbornly refused to budge as the US rose yesterday, kept down by the rising GBPUSD rate) and a stronger showing from Asia overnight. Iron ore prices have rallied which should help the miners overall a bit, indeed the ASX200 had a slightly bullish day today.
Morning all, good luck to Si and Icarus and all those holding long positions underwater……..hopefully we should get some sort of retrace tday….getting it over 7150 is important though so let’s see how we go…..
Making hard work of it so far!
Yeah Nick it is but the Market doesn’t like giving it back so it’s just up to its old tricks IMO….. Just sitting up my tree and waiting ….
Thanks anstel. As nick says the upward moves seem like a lot of hardwork. Not seen any convincing movements so far. No divergence on higher timeframes yet to take it upto 7175 even
10 ma on 2hr has been acting as a good support so will look to add to longs if we see a retrace to it
Well we are just below the 10 now on 2 hr ummn it’s tricky this…
Seems to be struggling to go up..when it was 7400 people couldn’t buy enough…
Yes you have to laugh that was only a week ago….lol :0) will it be heads next week or tails again….and this is the worlds financial system…..
Added at 7108. Now either it goes up or I close my position at a fairly big loss!
If you do hold your position Icarus I would consider protecting your risk over weekend…… A hedge is cheap insurance against any possible geo political events….
A stop won’t protect you if it gaps down over weekend….
Well a close over 10 ma on 2 hr is what I meant.
Re: a hedge I have been thinking about it and am open to any suggestions. Not sure what will OR won’t work as a hedge atm
The reply beneath was intended for you Icarus but I should really have placed it here,my mistake……
Still long and hoping to add next week. Bonds have been weak and GBP interest rates going nowhere so stocks are the default buy, so even if it drops over the weekend not bothered about holding them. Although am hoping for relief rally from Monday.
Oh slight mix up over the 10 sma……anyway re hedge….and some lessons I learnt the hard way…..
Holding a position,especially long over a weekend is potentially a catastrophic event waiting to happen,if we have an event that the market perceives as destabilising the market will more than likely gap down on open on Sunday night……ask me how I know!! Yep 200 pts was my lesson.the Greek crisis….and again with the Paris attacks…..but to a lesser effect….
Anyway you have to cover your risk,as it says in all the SB adverts “losses can exceed deposits” if it gaps down a normal stop will not protect you from the gap..you will end up will a negative balance and they will not close you out if your margin is below the minimum they require as long as the position is making them money.as soon as it bounces they will close you out with a red negative balance in brackets…..
A guaranteed stop cost x3 position size I think and it’s not going to be close enough anyway…..So a hedge is good way of protecting yourself over the weekend…..if you get it right it can actually make you money obviously but the main goal is an insurance policy.yeah you might loose a few points when you break your hedge but at least your limiting your risk…. DONT FORGET to click the hedge button,ive not made that mistake but be careful…….The other option is to realise your loss at best price you think on Friday and replace your exact position next week if you think it’s valid,no finance that way…..I use both ways depending on my situation….hope that helps good luck….
Better hedge is money-management. Sure there is event risk coming but for me that represents either the opportunith to take good profits if it rockets or a buying opportunity if it drops. I invested 40% of capital over last 3 days in FTSE ETFS having sold same at 7385. Whatever happens over weekend I dont care. I will lose no sleep. If it drops I hope it drops hard and I can buy in again much cheaper. If it rises 150 pips on Monday I may sell and await another buy signal. I will never be squeezed or be forced to close. Been doing it for years.
What happens if the Ftse crashes to 5500 ? Any doesn’t recover?
Cheers anstel, but my dilemma is more around which instrument is best for a hedge in this scenario. I am ruling out cable
If you are long on the Ftse you can hedge the entire position by opening a position in the opposite direction on the same market….you don’t pay any more margin….at least with my brokers so check that………don’t think there’s many large dividends due on Ftse but when you hedge on same market obviously it all cancels out……..another option in the early part of the year when there are big divi pay outs I’d to hedge with an opposing position on and Ftse futures contract…that way if your are long on the Ftse you get the dividend and if you are short on the Ftse futures contract there are no dividends that you have to pay…..check this first though with your broker…..only thing is if you use a futures contract you may have to provide more margin….so check first… It’s a win win situation then regarding dividends and you get the chance to roll the futures contract over at a reduced spread if you need to extend the time scale……hope that helps further…..
Stocks always recover. I will collect dividends as I await the recovery. I wont be taking margin calls 🙂
I wont be wiped out. I wont be sweating it. There will be no opportunity loss as interest rates are low and likely to be slashed further in such an event.
In fact in such a scenario I am likely to liquidate other assets and keep on buying.
Policymakers tend to step in nowadays to prevent such occurences.
So if it goes to 3000 it wont be a problem.
Looks like you have it covered from all angles then…….provided you are young enough because when this lot crashes it won’t be bouncing back in a hurry in my opinion …..what you are doing then is pretty much investing in shares indirectly is that right CM ? Who is a good provider of ETFs on the secondary market or retail market I wouldn’t mind doin some research on them while I’m sat up my tree….cheers all good information ….
I read some stats recently which indicates that $1 trillion has moved from stocks into passive investments like etfs and mutual funds. The jist of the message was investing is evolving, but then the question is who will invest in stocks and how much control will they have over price. That’s a totally different ball game then. You might as well be presented with a scenario where stocks don’t recover!!
My point being of course that because I am not leveraged I put myself in a position where I cannot lose. It is only a question of how much I will make. And how fast I will make it.
Fair point if time is not an issue
Take this example of risk. An investor buys 1000 pounds of a company say BP, who then spill some oil into the sea and the share price halves overnight. How long to recover from there if he holds? 10 years assuming 4% dividend and no real share price improvement. 10 years to get back to square one in nominal terms but in real terms its more like 25 years to account for currency devaluation, inflation, and opportunity loss for the original capital. Hence Buffets 2 golden tules which are both…dont lose money. So if our investor had another 1000 to invest and bought at the weaker share price, the maths are astonishing. It only took about 3 years with BP to move into a real gain. What a difference. Money management approa h is very difficult for the market to overcome, it just requires a bit of disciplne.
That’s what I thought when I had Halifax shares lol…..same thing with Bradford and bingley,Northern rock.the list goes on……at the end of the day you will lose when the market crashes and doesn’t recover….it’s so over inflated it can’t go on for ever…..just sayin your not invincible…..non of us are but your downside is limited because you are not using leverage…..Pride always goeth before a fall,,,,just sayin be careful…..good luck all the same,we all need it….
I never invest in single companies thats where you can lose all your capital alright. Only in FTSE ETFS. Thats never going to zero 🙂
The thing here is this,after the 2008 collapse the Ftse dropped to around 3500 I think,can’t remember exactly.by 2009 the Market started to recover but it’s all B/S…the fed just pumped it up….QE1….QE2….QE3…..print and pump…in fact let’s not even print lets do it electronically it’s quicker and cheaper and we can distribute it all through the BIS…..so I think I would be putting the fed on your xmas card list because if they get bored of their little game this lot is not going to recover in my opinion..Its just one big mickey take by the people who run the show…:0)
If I was approaching retirement I wouldnt be holding stocks so I am fairly young.
You can buy any FTSE ETF eg CUKX, I pay NO STAMP DUTY and almost NO SPREAD. Obviously NO FINANCING charges apply and COLLECT DIVIDENDS every week. I pay about 7 quid for the transaction. Obviously I try to sell high and buy low and generally do well. I do not short markets the costs are outrageous even through ETFs. So if I think FTSE is going to collapse I may prefer to buy a gold ETF. Or a dollar fund although generally prefer to avoid currency risk.
The human mind is incapable of comprehending the effects of compounding wins or losses which is why so many people lose fortunes to casinos sorry I mean SB companies.
It is I would say easier to run winners holding an ETF than SB or CFD positions.
Emotion isnt really at play. You are not trying to recoup losses from the casino.
You will become more patient and rational.And richer.
OK lads that’s me done ive taken a really good wage tday ,I don’t think there’s much on offer here this week (famous last words) so I’m off to walk the Dog…good weekend all…best of luck Icarus,CM,and all……
HANW .
Thanks anstel. Have a good weekend
So, I have closed my position that I opened today for 10 points! I have decided to keep the long from 7195 running. I think we have a mini rally developing which should get to 7175 I reckon. Lets see, good weekend guys!