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.

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.

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 26^th 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 21^st 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.

We wrote in our weekly update to LS Trader subscribers last Sunday that although the S&P 500 had broken out of the lateral trading range to the upside that the subsequent price action since then had not been convincing and that we therefore did not have a buy signal yet. We also wrote that although the price has closed above the prior resistance, the last 3 sessions have been of a doji pattern, which indicates that the market is tired and this is coming at a resistance level around the 1120 area.

On Monday the S&P 500 moved higher, briefly clearing the 1120 resistance level posting a high for the day of 1129.2 (September contract) but was unable to hold there and closed back down at 1110.6. This in a way confirmed the tiredness and resistance that we had seen in this market from the prior 3 sessions. Although the long term trend remained up and still is, this does not bode well for the short term.

The S&P 500 continued with short term weakness for the next 3 days, closing last night at 1070.5, which is already down 3.58% for the week. There is some support around this 1070 area so this level will bear watching closely today. A move below 1070, especially on a close tonight would be very bearish and would bring the lows at 1034.8 right back in to play.

We have mentioned previously the importance of the 1034.8 level as it represents a few key things:

• A break at this level would change the long term trend to down according to our proprietary indicators that we use at LS Trader.
• This level is same level of the lows of the previous sell off on February 5^th.
• There is a hammer pattern from which the rally began from the lows on the 5^th and this hammer pattern is a bullish reversal pattern and provides support to the market until we get a close below the low of the hammer.
• A move below this level would also be new contract lows and new lows for this year.

In addition, there is also the possibility of a very large head and shoulders top pattern forming on the S&P 500, with the neckline at, yes, you guessed it, 1034.8! This would be a very large head and shoulders pattern and if the neckline was broken then the distance from the head to the neckline would be subtracted from the neckline to give us a downside target of around 860! It must be said that this would be a highly bearish target and that also these patterns have a tendency not to work out, especially when they are so obvious and so many people will see them.

However, this does fall in line with our longer term view at LS Trader on the stock markets and we are bearish overall and expect lower prices in the stock markets later this year and for prices to be significantly lower at some point during the next 12 months. It should be noted that on a seasonal basis we are moving in to the weakest time of the year, with September on average the weakest month of the year.

From a spread betting perspective a move of this magnitude would be very profitable. One of the great advantages of spread betting is the ability to be able to spread bet markets such as the S&P 500 without needing anywhere near as much trading capital as would be required if one was going to trade the actual futures contract, which is way beyond most people.

Most spread betting platforms will offer prices on the S&P 500 from around £10 per index point. In our example above then, even at minimum size of £10 per point, the potential profit from this move would be £10 x 175 = £1750. If one was to use around a 50 point stop which is reasonable on the S&P 500 in the current volatile trading conditions this would represent a risk reward of 3.5. This would also be tax free for UK Residents and financial spread betting is currently tax free in the UK.

Until next time, good luck with your spread betting

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading methods please click here.

It’s now around 8.20am on a Monday morning and my financial spread betting for the week is already done! Now all I do is wait for the weekend and can go about my business. I don’t have to worry at all about what the markets do as I know that most of what goes on in the markets on a day to day basis is just noise. My stop losses are in place to protect my trading capital from any losses and also to take me out of my profitable trades if the market reverses.

How is this possible? Well, the financial spread betting system that I created, the LS Trader system, is a medium to long term trend following system which only takes around 15 minutes each week to follow. This means that all we do is open trades up on a Monday morning, add some stop losses and then move the stop losses on trades that we had open from previous weeks.

Sometimes we will get stopped out after a day or two if the market moves against us and other times we could be in trades for several months if some nice trends develop. Last year there were several markets that trended very well and we were in numerous trades for more than 100 trading days (assuming 5 trading days per week, that’s more than 5 months for a single trade!)

To use the LS Trader system, all you do is log in to your account at the LS Trader website (once you have signed up) and go to the trade bet calculator page. On this page there is a full list of all the markets we trade and details of all the trades we are currently in as well as all the trades we are opening this week.

You then go to your spread betting platform, such as IG Index and go to the market that you want to open, check the current market price, enter this figure in to the bet size calculator that we provide. You then enter how much money you have to trade with and the calculator tells you exactly how much to bet per point. It’s so simple. The software also shows you exactly where to put your stop loss.

All in all this is a very simple process which takes on average around 15 minutes per week. This week is a busy week as we have 9 new trades to open, so it actually took me a few minutes longer than normal.

To follow this financial spread betting system you don’t need to know anything about trading or the financial markets and you certainly don’t need to be reading newspapers or watching TV trying to figure out what’s going on in the markets. There are no charts that you have to read or data feeds that you have to subscribe to.

We’ve actually made trading the markets very simple even for the complete novice. And you can do it all from the comfort of your own home on your pc in just a few minutes per week. You don’t even need to phone a broker as you can execute all your trades instantly online. Best of all, as what we are doing is trading the markets via financial spread betting all our profits are tax free! Currently spread betting is tax free in the UK.

The bottom line is trend following works. It’s been around for several decades and has always and will always work. It takes all the guess work out of trading as it has simple specific rules to follow which lead to capturing big profitable moves in the markets.

There are numerous top traders who use trend following as their trading strategy to consistently beat the markets. Now, we’re making a very powerful version of this trend following strategy available to you and we’ve done all the work for you. All you have to do is simply copy our trades. How easy is that?

If this sounds like something of interest to you, and after all why would it not be as who does not want to “work” for around 15 minutes a week to produce a tax free income, then simply click here to visit the LS Trader website and sign up.

Good luck in your trading

Phil Seaton

PS. Click here to sign up for the LS Trader system. The system comes with a no quibble 30 day unconditional money back guarantee.