Spread betting strategies for trading the news
Today we are going to discuss spread betting strategies that can be used ahead of a major news item. Later today the second quarter US GDP numbers come out and we get asked frequently about which spread betting strategies we use ahead of such major news announcements.
The answer is actually quite simple. Since we are technical traders and follow mechanical trading rules we are either already in a trade if we want to be in it, or know where we will get in should our entry criteria be hit. We don’t base our trading decisions on trying to predict the news items, or how the markets will react to the news. We simply follow the trend.
Since our spread betting system is a weekly system, we don’t enter trades immediately before, during or after a news item as we are already in the trades that we want to be in. We don’t therefore enter again until the following Monday, using the closing price on Friday as our entry should the price action in the immediately preceding week trigger a buy or sell signal for us. We therefore use spread betting strategies based on a weekly timeframe and don’t concern ourselves with intraday news.
Trading systems are either predictive or reactive. We don’t get involved in trying to predict, but rather react to price action. We know already where we want to get in and where we want to get out based on the price and chart structure. The rest is irrelevant. Should the market exceed the levels that we have predetermined will be optimum for entry, either for long or short trades, then we will enter. If the market does not exceed those levels then we stay out.
Let’s just look at what is expected today as far as the news is concerned out of interest, although we won’t be basing any of our spread betting strategies on it. Economists are expecting that US GDP growth for the second quarter will come in at 2.5%. I expect that it may disappoint and come in lower than that, possibly closer to 2%. If that does happen then we may see a reaction to the news that moves stocks and currencies considerably.
We have already covered this week that the long term trend is down for stocks and have identified a couple of key resistance levels, which are 1118 and 1129 on the September S&P 500. As long as the market stays below those 2 levels then the short and long term trends will remain down and the odds favour lower prices.
Yesterday we got a close below the important 1100 level at 1097 on the September contract and also below the 200 day moving average, which many traders look at. We also had an evening star pattern form on the S&P 500 earlier in the week which is bearish for the short term so various things point to lower prices to come.
What this really boils down to is that you should have a trading plan in place ahead of any news items or price reactions and know exactly what you are going to do and why. Once you have your plan in place then you stick to spread betting strategies within that plan and trade accordingly.
There are many traders and economists that try to predict news items and how the markets will react to the news item depending on what the numbers are. It’s far better in my opinion to just focus on the most important indicator of all, which is the price itself. Then all you have to do is follow the price and the trend.
Until next time, good trading
Phil Seaton
PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here.
Spread Betting Strategies | Bearish Patterns
Today we are looking at bearish price patterns and spread betting strategies. We will base this primarily on the S&P 500 as that is the primary stock index that we focus on. The reason we do this is that the S&P 500 is the real stock market and the other indexes tend to take their cues from the S&P 500.
There have been a few key levels and indicators in the S&P 500 that we have been writing about of late. We have previously been focusing on resistance from 1100 when the market was below that level and also the major resistance at 1129.
Friday’s close on the September S&P 500 contract was bang on 1100 and this week continued the recent short term strength and pushed up above 1100 and the 200 day moving average. This was relatively bullish short term and the market continued higher to 1118 on Tuesday. Critically, this move fell short of resistance at 1129, so the short and long term trends remain down. This means that only bearish spread betting strategies should be considered at this time as the odds favour lower prices.
Considering the recent strength and the fact that this market cleared 1100 and the 200 day moving average we should perhaps have seen more follow through and an actual test of 1129, but the rally fell short. We also have an evening star pattern formed in this market over the last 3 sessions, which is a bearish reversal pattern and suggests a top in the market. When we have an evening star, we use the top of the pattern as resistance, which in this case is Tuesday’s high of 1118. If the market moves above 1118, especially on a close, then this pattern is negated and a likely test of 1129 resistance will probably follow.
Yesterday’s price action also took the market back down towards support at 1100, with a low for the day at 1099.5, before closing at 1102. This is once again right on the 200 day moving average as well as support from the 1100 level. In the short term then this market can clearly go either way and the levels to watch are 1100 to the downside and 1118 and 1129 to the upside.
As long as 1129 resistance holds, this market is in a bearish set up and the long term trend is down, so we’ll continue to favour spread betting strategies from the short side and reject longs for now.
One other point of interest, certainly for UK residents who use spread betting is the bearish formation on the FTSE. The FTSE is not a market that I like because of its lack of trending properties, but I know many traders in the UK follow it. On Tuesday we had a shooting star pattern, which confirmed resistance at 5385, followed by a bearish engulfing pattern on Wednesday. This suggests a top in this market, and as long as 5385 resistance holds then bearish spread betting strategies should also be favoured here. The long term trend in the FTSE is also down, as with the S&P 500.
Until next time, good trading
Phil Seaton
PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here.
Spread Betting Strategies For Gold
In our last post of spread betting strategies for Gold, posted Friday morning, we wrote that Gold was in a trading range between $1200 and $1175. Later on that day Gold actually pierced $1200 resistance intra day but was unable to stay above that level and proceeded lower.
On Monday the market was lower again and yesterday we got a downside breakout through support at $1175 (August contract). IG Index is now quoting Gold on the December contract so we now shift our focus to December’s contract. There is actually only $3.80 difference between the 2 contracts, with last night’s close on August at $1158 and December’s at $1161.8
Looking at the December contract there is some support at $1161, which is right where last night closed. In early trading this morning the market is around $5 higher at the time of writing this. Slightly below that support level we also have the 200 day moving average, which may also provide support. The 200 day moving average is currently sitting at $1150.
Candlechart pattern wise we have 3 consecutive red candles, which indicates 3 straight down days, with yesterday being a log red candle for the large move down from highs of $1190, down almost $30 in the day to $1161.8.
The short term is without doubt down, but the long term trend is still up and the market is above the 200 day moving average, which many traders will be watching. There are still other levels of support in this market that need to be cleared before a long term change of trend to down is confirmed, so for now we are sitting on the sidelines in this market. Longer term we’re still therefore only looking at spread betting strategies from the long side, but will need to see a move back above $1222 before there is any upside momentum.
Good trading
Phil Seaton
PS. Find out more about LS Trader financial spread betting system and our spread betting strategies by clicking here.
Financial Spread Betting Weekly Update
This week’s LS Trader financial spread betting update is now available and can be read by clicking here.
During the past week we saw weakness in the stock markets followed by renewed strength in to Friday’s close. The S&P 500 closed right on a key level and the coming week promises to be an interesting one.
Recently on this site we have been focusing in particular on two markets, gold and the S&P 500 and spread betting strategies for those two markets. We have an update on both of these two markets in the weekly update. We also have a look at Crude, which continues to trade within a wide range, we well as our usual forex market focus.
The past week saw another week of declines overall for the US Dollar, albeit not by much as well as a strong finish to the week for the British Pound which has been strong of late and may be on the verge of a long term trend change to up having been in a downtrend since September 2009.
We also have an update on the strongest and best trending sector at the moment, which is the interest rate futures and includes markets such as the 5 & 10 year T notes and the 30 year bonds. Each of these markets made new contract highs during the past week. At LS Trader we have been long these markets and this sector on the whole since early May.
This week’s LS Trader financial spread betting update begins with:
The past week saw the stock markets move lower early in the week and then recover on Tuesday. The week ahead promises to be interesting as the stock markets are now sitting at a key short term level and could move either way over the next few days.….continue reading by clicking here
Good trading
Phil Seaton
PS. You can sign up for a risk free trial of the LS Trader financial spread betting system by clicking here. The system comes with a 30 day no questions asked money back guarantee and covers each of the stock, commodity and forex markets discussed above.
Spread betting strategies
Today we are continuing our focus on gold and the S&P 500 and looking at spread betting strategies that can be applied to these markets.
In our last post 2 days ago on gold we wrote that the market was continuing to reject the lows and that if the market was going to move lower in the short term that the breach of support at $1185 should have had more follow through to the downside than it did. We noted that the lower shadows on the candle patterns seen on Monday and Tuesday were indicative of the lows being rejected due to buyers coming in and that the piercing pattern on Tuesday was pointing to higher prices.
Since then we had a doji pattern on Wednesday, which reflects indecision and yesterday we had a bullish engulfing pattern and a brief test of $1200, which was also rejected. Therefore we are in a short term range between $1175 and $1200. A break of either may give rise to movement but there is considerable support to the downside as mentioned in our previous post and upside resistance is firm around $1200. Long term the trend is still up, so spread betting strategies from the long side should be favoured and I’ll continue to hold off from shorts for now.
The S&P 500 continues to be volatile and large swings on an almost daily basis are being seen in this market. Yesterday was a very bullish day, which ended with being a bullish engulfing pattern. However, this would be a very poor long trade candidate for 3 reasons at present:
- The long term trend is down
- There is good resistance at the psychological 1100
- There is also resistance from the 200 day moving average at 1102
If 1100 and the 200 day moving average can be cleared to the upside then we may see some further upside movement towards major resistance at 1129. As long as 1129 is not cleared to the upside then the series of lower highs and lower lows will remain intact and we are still in bear market territory.
As with gold, only spread betting strategies in the direction of the long term trend should be considered, which in the case of the S&P 500 is still down.
Good trading
Phil Seaton
PS. Find out more about LS Trader financial spread betting system and our spread betting strategies by clicking here.
Spread Trading Strategies | Trading Gold
In our most recent post of spread trading strategies for gold we wrote that the $1215 level for gold was still key to the upside and failure for the market to clear that level would lead to a test of strong support at $1185. Last Friday’s close at $1185.8 was a new low close for 9 weeks, so without doubt the short term trend was moving down.
Considering the short term weakness in this market, a failure of support at $1185 should have led to a move down to the next support area at $1168, but having moved lower initially on Monday to $1176.9 the lows were rejected and the market climbed a bit but still closed below prior support at $1181.9, giving a new low close for this contract and a close below prior support.
Yesterday the market made another push lower but once again the market rejected the lows and pushed higher again. This formed a piercing pattern on the daily charts, which is a bullish reversal pattern and the market closed back above $1185 at $1191.7. At the time of writing this morning, the market is fairly quiet, hovering just below the $1190 level.
When considering which spread trading strategies to use on gold, there are a few things to consider, firstly, without a doubt the long term trend is still up and therefore the odds favour higher prices. It will take a large move to the downside to change that long term trend to down.
Also to be considered is that we have 2 good support levels in the market at $1168 and also at $1157. We also have a third good support level at $1125 and the obvious $1100 level as well. Therefore, to get a decent move to the downside would require bulldozing through several strong support levels.
In the more immediate term, the last 2 days candle patterns have reasonably long lower shadows and this indicates rejection of lower levels as well as yesterday’s piercing pattern, which is also bullish short term. I’m not a buyer at these levels as that would be counter to the short term trend and will be waiting for more strength before entering longs, but will not be entering short any time soon.
Good trading
Phil Seaton
PS. Find out more about LS Trader and our spread trading strategies by clicking here.
Spread Trading July 2010 Newsletter
This month’s financial spread trading newsletter is now available. To read the newsletter, please enter your email address in the box at the top right hand corner of this page and we will send it to you instantly by email.
In this month’s issue we take a look at the majority of the 43 markets and the major market sectors that we spread trade at LS Trader, focusing particularly on the major stock indexes, commodity and forex markets as well as the interest rate futures sector which covers short term interest rates all the way through to 30 year bonds.
This month we focus primarily on the stock and forex markets, as that is where much of the action is likely to be over the coming weeks. We look specifically at major support and resistance levels in some of these markets as well as what our LS Trader trend indicators say about the markets and what may happen next.
In each month’s issue we focus on the long term trend and cover some spread trading strategies that can be used in the direction of the long term trends to increase the odds of successful trades.
We also have a market of the month section, which this month focuses on a market that has continued to rise against the odds and looks set to continue higher, especially if further weakness hits the stock markets.
Good trading
Phil Seaton
P.S. To receive each month’s newsletter by email simply enter your name and email address in the box provided in the top right hand corner of this page for instant access.
P.P.S If you are not already a subscriber to the LS Trader system you can sign up for a risk free trail by clicking here. The LS Trader system is a complete spread trading service and comes with a 30 day no questions asked money back guarantee.
LS Trader Spread Trading Weekly Update
This week’s LS Trader financial spread trading update is now available and can be read by clicking here.
During the past week we saw an initial continuation of the stock market rally followed by failure to move higher at resistance and then a sharp reversal. We look at what may happen next for the S&P 500 focusing as ever on the long term trend and the impact that major moves from the S&P 500 on other markets.
As usual in addition to our stock market focus we look also at commodities, in particular Gold and Crude oil and the key levels to watch out for in both of these markets. We also look at the continuing rally in interest rate futures as traders seek safe haven investments.
On the subject of safe haven investments, the Japanese Yen has rallied to new highs for the year and the Swiss Franc has also risen to its highest level in almost 6 months, whilst the US dollar has continued to slide. Recently the dollar has gained when stocks have fallen and that inverse relationship seems to be abating at present as the US dollar index has fallen to new 10 week lows. This decline has been to the benefit of the Euro, which briefly touched $1.30 last week. We wrap up our forex focus with a look at the British Pound.
This week’s LS Trader financial spread trading update begins with:
The past week saw the recent stock market rally run out of steam and reverse sharply on Friday, which may be a sign of things to come.….continue reading by clicking here
Good trading
Phil Seaton
PS. You can sign up for a risk free trial of the LS Trader financial spread trading system by clicking here. The system comes with a 30 day no questions asked money back guarantee and covers each of the stock, commodity and forex markets discussed above.
Spread trading strategies for week commencing 19th July 2010
Today we have another post of spread trading strategies for the coming week, with our focus again on the S&P 500 and Gold. Gold seems to be the ever-popular market and the S&P 500 is the real stock market, so is as good a place as any for our attention.
Last week we wrote that the S&P 500 had been pushing up towards resistance at the 200 day moving average, which was also in the area of another round number, the 1100 area, but that the market was running out of steam at that level. On Wednesday we had a spinning top, Thursday was a northern doji and Friday was a long red candle.
The spinning top and northern doji are not reversal patterns but show that the market is struggling to push higher and has lost momentum. When this happens at a resistance level, which it is in this case, that adds to the bearish scenario. From there we still however need price confirmation to the downside and we got that in the form of the long red candle on Friday, which was a 2.5% down day.
If we look at the candles from Tuesday onwards we have a long green candle, 2 dojis and a long red candle. Although this does not technically make it an evening star pattern, I view it as such as the addition of the extra candle does not alter the market psychology at these levels. This pattern shows a shift back to bearishness in this market again, which is in the direction of the long term trend, down.
We wrote last week that we viewed the recent rally as a bear market rally and that more importantly we were in a classic bear market set up with a series of lower highs and lower lows. Last week’s highs look like yet another lower high in this market so we should now see another lower low, which would take out support at 1000 and give new lows for the year and will likely put a 9 handle on the price with the first sub 1000 target at 980.
The odds therefore favour a continuation lower to test 1000 support again and this market must be considered bearish below what I call resistance 1 at 1100 and resistance 2 at 1129. As we wrote last week, the short term remains bearish as long as the market stays below 1129 but a move above that would change the intermediate trend. Therefore, only short spread trading strategies should be considered here unless 1129 gets taken out to the upside.
Now let’s take another look at Gold. Last week we wrote that $1215 was looking like a key level in this market and that we were looking for a close above this level or a move back towards support at $1185 may follow. Gold cleared $1215 intra day but did not close above it and this led to a move back down to almost exactly $1185, with lows for the week at $1185.8.
We are therefore almost exactly at support 1 in this market and a breach of support here may bring $1170 in to play. For now the long term trend is still up as there has yet to be anywhere near enough weakness in this market for a long term change of trend to down. Our proprietary trend indicators at LS Trader show that the trend is down for the S&P 500 and stock indexes but still up for Gold.
Good trading
Phil Seaton
PS. Find out more about our spread trading strategies for stocks, commodities and forex by clicking here
Spread trading strategies | Stock markets at resistance
Continuing our focus on the S&P 500 and different spread trading strategies that can be used on this market, today we are looking at the resistance from moving averages. We tend to focus more on the S&P 500 than other stock indexes as the S&P 500 is the main stock market and the other indexes tend to take their lead from this index.
Yesterday I wrote that the S&P 500 was pushing up towards resistance at the 200 day moving average, which also happens to be at another round number, the 1100 area. The high in the market yesterday on the August S&P 500 contract was 1099, where the market reached resistance and pulled back to close at 1091.1.
Although I’m not a huge fan of moving averages (my research and testing shows that they are not nearly as important or useful as people think and I’ll write more on that another time) one average that is focused on by many traders is the 200 day simple moving average, and on my charts that is sitting at 1101.
What we saw in yesterday’s chart was not a reversal pattern but more a sign that the rally was running out of steam and this carries a bit more significance when we see this kind of formation happen at resistance. That said, I don’t think that the 200 day moving average is particularly huge resistance in and of itself but added to the 1100 level this increases somewhat.
If this resistance at the 200 day moving average holds then what will be important is that this will be yet another lower high in this market from the highs of this year and the prior bull run, formed on the 26th April. A series of lower highs over a period of time (the longer the better) is a classic set up of a bear market. Therefore, the current resistance level is worth watching closely for short term direction when deciding which spread trading strategies you are going to use on this market.
A far more important level in my eyes is the high on the 21st June 2010 at just shy of 1130. If the market can clear the 200 day moving average and 1100 level, the 1130 level will be the next target for the bulls. If that level is cleared then we may be looking at a different scenario for the intermediate term but for now things are still bearish and the long term trend is down.
Overall I still favour spread trading strategies from the short side only at present, not just in the S&P 500, but in all stock indexes, and am not looking at any longs as that is counter to the long term trend. Successful spread trading is all about turning the odds in your favour as much as possible and one strategy for this is to only take trades in the direction of the long term trend and reject counter trend moves.
Good trading
Phil Seaton
PS. To find out more about the LS Trader financial spread trading system and our proprietary spread trading strategies for stocks and commodities please click here.
