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:

  1. The long term trend is down
  2. There is good resistance at the psychological 1100
  3. 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

 

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Discuss: “Spread betting strategies”

  1. July 24, 2010 at 5:29 am #

    Cool, there is actually some good points on this post some of my friends might find this relevant, will send them a link, many thanks.

    Posted by Dearcos

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