spread-betting-ftse-100

2011-02-18T03:55:00.001-08:00

To learn more go to www.eyield.co.uk

FTSE: resistance at 6056

2011-02-07T00:22:00.000-08:00

S&P 500 Alternate wave count

2011-02-01T06:09:00.001-08:00

S&P 500

2011-02-01T05:34:00.001-08:00

Dow Jones near the top

2011-01-28T02:45:00.000-08:00

www.eyield.co.uk

2011-01-26T10:17:00.000-08:00

A potential rally to 5300

2010-02-08T07:44:00.000-08:00

The bearish nature of the BTI is associated with a declining market which is what
we are seeing, but this does not mean the FTSE will not rally.

When the trend is down, rallies which are counter trends, occur on declining BTI.
We saw it in the first three days of February, the bearish divergence between the
BTI (declining) and the FTSE (rising) was a clear indication that the rally was
counter trend and not the resumption of the bull market. Investors are cautious
because they know last year performance will not be repeated. If the conditions
for a rally or a continuation of the bull market are not perfect, they will sell.

Our timing indicator, 13-day BTI, is certainly in a position for a rally. When the
13-day BTI is oversold, the decline is nearing an end, see chart.

The decline is nearing an end also because we have five waves down from the top
on 11 January. The more indicators pointing in the same direction, the better. A
completed impulse wave accompanied by an oversold timing indicator is a more reliable
signal to go long.

To learn more go to www.eyield.co.uk

Three indicators in one

2010-01-27T05:38:00.000-08:00

At eYield we have developed a new tool to trade the FTSE 100. It is not for intraday traders but for those who do not have the time to follow the market during the day. You receive an email in the morning before 8am and another in the afternoon after 5pm. The system gives Buy and Sell signals on the FTSE 100.

Each update contains information about the current state of the FTSE 100, long,
short or neutral, see table.

The FTSE Timing Indicator is an affordable system with a high success rate. Its
signals are derived from three of our proprietay indicators, 13-day BTI, Top 20
Differential and Beta matrix.

The 13-day BTI measures extremes in sentiment. When sentiment is too bearish, the 13-day BTI is oversold, this situation tends to occur at market bottoms.

The Top 20 Differential measures how some of the largest stocks by market capitalisation move in relation to the FTSE 100. When the big caps are oversold so too is the FTSE.

The Beta matrix measures investors' risk appetite. When the Beta matrix hits a high then turns down while the FTSE continues to decline (bullish divergence), it's a signal to go long.

When each of these indicators gives its own buy signal, the odds of a FTSE rally
increase significantly. For example yesterday the Top 20 Differential reached oversold and today a bullish divergence occurred on the Beta matrix. The 13-day BTI is not far from oversold. The FTSE Timing Indicator gave a Strong buy.

To learn more go tow ww.eyield.co.uk

A complex fourth wave

2010-01-21T04:38:00.000-08:00

Markets move up in five waves (bull market). Sometimes the wave pattern can take longer to fully develop, in particular with a fourth wave.

Fourth waves are characterised by indecision, they occur after a strong move [third wave], so it is no surprise that most fourth waves are sideways. Another characteristic of fourth waves is that they tend to retrace 38.2% of the third wave, this is why, when the FTSE dropped below the 38.2% Fibonacci retracement [5447] on Tuesday, we believed that wave iv (circle) was over, see chart.

Obviously it was not the bottom as prices decline further yesterday, the decline occurred on rising BTI, an indication that the move down is counter trend. The BTI is a sentiment indicator, in a bull market a FTSE decline accompanied by rising BTI is bullish.

As a result there is good reason to believe that yesterday's decline is still wave iv (circle) which extended to the 50% retracement. We have a complex correction [(a),(b),(c)] in which wave (b) is an expanded flat. Wave iv (circle) may be over, if not it will end near 5380. The next move should be wave v (circle), an initial target is 5620.

To learn more go to www.eyield.co.uk

eYield timing indicators

2010-01-12T05:25:00.000-08:00

In my previous email I said "after a strong run the FTSE is vulnerable to a set back. Markets move in waves with predictable patterns. The current pattern is ending and our timing indicators suggest that the FTSE will pull back".

Today the FTSE is pulling back. Is it the beginning of a long term decline or simply a correction in the uptrend? It does not really matter except if you are a short term trader. We trade the short term trend, so the current decline provides us with an opportunity to take profits, we are not prepared to stay short because the FTSE may rally again.

But how did I know the decline was coming? Using eYield FTSE Timing Indicator, investors can anticipate a decline with a high degree of certainty, see chart.

When the indicator gives a sell signal the probability of a decline is 80% but this does not mean the decline will start immediately. The last sell signal was on 4 January, as you can see on the chart sometimes the market will continue to rise for a few days. I must warn you that the period July-August last year was not the best time to judge the indicator as the FTSE kept rallying.

In general markets do not move in a straight line, they tend to move up and down or sideways. This is when the indicator performs best.

To learn more go to www.eyield.co.uk

FTSE is overbought

2010-01-08T04:25:00.000-08:00

After a strong run the FTSE is vulnerable to a set back. Markets move in waves with predictable patterns. The current pattern is ending and our timing indicators suggest that the FTSE will pull back, see chart.

Beside a positive 34-day BTI we assume that the bull market is still alive because prices made a new high yesterday, this latest move changes the wave count.

Instead of a fifth wave up we have a third wave extension. The rally from 5200 to yesterday's high is wave iii (circle) of 5, the move is clearly in five waves [(i),(ii),(iii),(iv),(v)]. Because wave (i) is longer than wave (iii) and wave (iii) can not be the shortest wave, wave (v) will be shorter than wave (iii). It's possible wave (v) ended yesterday, if not it should end in the 5540-5600 area.

Once wave (v) and wave iii (circle) are complete the FTSE will correct, this move will be wave iv (circle). An initial target is 5450.

To learn more go to www.eyield.co.uk

Banks and the Dollar

2009-12-22T03:49:00.000-08:00

There is no need to be bullish unless you are a short term trader. The FTSE 100 may well climb past 5400 but early next year the trend will change, we could be near the start of a major correction.

Two markets that have helped the FTSE 100 rally from the March lows, the bank index and the dollar, are no longer behaving as expected, see chart.

The dollar has been too low for too long. Note the inverse correllation between the dollar and the FTSE 100 since march. The dollar turned down in early March and has been going down until early December. The sharp rally in the dollar should coincide with a turn down in stocks.

With regards to bank stocks, the correlation has been positive since March but take a look at the chart of the Bank index and you will note that banks made their highs in September while the FTSE 100 continued to make new highs after September. The relative strength line has been declining since August, an indication that bank stocks are no longer fuelling the FTSE 100 rally.

These events are major bearish developments but we may have to wait until January before the next bear market begins as in the short term the FTSE 100 could rally to new highs.

To learn more go to www.eyield.co.uk

Great traders are patient

2009-12-15T05:09:00.000-08:00

In the book Market Wizards, Interviews with Top Traders, the author writes "many of the traders stressed the importance of having the patience to wait for the right trading opportunity to present itself".

I completely agree with the above statement, I have been trading for many years and I can tell you patience is one of the most important factors that lead to success. Why? Because there are many opportunities everyday but only a few trades have a high probability of success. Your task is to identify these high probability trades and be patient until they present themselves. They are the ones that will make you money.

Another situation in which patience is required is when you have a bad run. You've been winning consistently, suddenly it's no longer working, you give up. This is the wrong thing to do. Why? Because the market has the habit to trick investors into doing the wrong thing. The thing is, the market can trick you for weeks or months, making you believe that your system no longer works. In fact your system works and if you have the patience to continue trading your system, you'll be back on the winning track. It happens to every trader.

For example we have a system that makes on average 60 points per month (FTSE 100), it has produced good results consistently since May 2007 but in July it started to lose, see table.

As you can see the system lost money between July and September. Subscribers who joined in July were disappointed, many of them did not have the patience to remain loyal to the system for more than three months. The result? They quit at the wrong time, they were not patient so they will never know what they are missing. Since September the system is back on track, with gains of 125 points and the latest signal in December is already showing a profit of 80 points.

Too many people fail at trading because they do not have the patience to ride these adverse market moves which are completely normal. Temporary set backs are part of the game, you must accept them otherwise you will fail.

To learn more go to www.eyield.co.uk

When to take profits

2009-12-10T13:15:00.000-08:00

When an important piece of news like the US nonfarm payrolls comes in much better than expected, you would expect the market to rally strongly. The S&P 500 did rally strongly last Friday just after the open. The index made a new high at 1119 but something unusual occurred later in the session, see chart.

Note the sharp reversal after 3pm, the good news turned bearish. After making a new high prices dropped 2% by 7.30pm. This behaviour was warning of a potential trend reversal. We saw a similar example in September when the FOMC rate decision was bullish yet the market reversed.

After a long advance, good news is often used by investment managers to unload shares. If you have a long position in the S&P 500 it is always a good idea to close it on good news. On the chart, the early reversal on Friday 4 December was a bearish development. Holders of a long position in the S&P 500 who did not close it on the day had an opportunity to close it on Monday 7 December when prices bounced back.

To learn more go to www.eyield.co.uk

Compass is overbought

2009-12-03T07:32:00.000-08:00

Shares in Compass Group surged to new highs following a recent trading statement. Prices have rallied to a level that could proved to be a strong resistance, see chart.

On the long term chart (weekly) note the RSI line at the bottom of the chart. The Relative Strength Index (RSI) is a popular oscillator. It is a momentum indicator used to identify oversold/overbought conditions. When the RSI rises above 70 the stock is overbought, when it drops below 30 the stock is oversold.

In the last few years the RSI has been accurate at finding tops/bottoms. It fell to 30 in October 2008, that was an early warning that the stock's decline was about to end. Today the RSI has risen to 74 which is above the limit of 70 as it did in May 2007. In 2007 it was signalling an imminent top, today we have the same message, Compass' rally is nearing an end.

According to the indicator, the stock is overbought. When a stock is overbought it tends to pull back until the RSI returns to the middle of its range. This is a strong possibility as the breakout in October this year was a long term breakout. In a long term breakout very often prices will pull back to the breakout point before resuming their advance.

To learn more go to www.eyield.co.uk

A complete Elliott wave cycle

2009-12-02T04:08:00.000-08:00

The stock market moves up in five waves and corrects in three waves. That's the basic tenets. There are many variations but in general the stock market follows this basic pattern. Take a look at the chart.

Here we have a perfect example of five up, three down. The FTSE 100 moved up in five waves [(i),(ii),(iii),(iv),(v)] during the first half of November. A common feature is for the third wave to extend in five waves as shown on the chart. Inside wave (iii) are five waves [i,ii,iii,iv,v]. Very often the fourth wave will be sideways. On the FTSE 100 chart note that wave (iv) is sideways (triangle).

Once five waves up are complete the market should correct in three waves. The FTSE 100 did correct in three waves. The first wave is a zigzag [(a),(b),(c)] ending at 5225, the second wave is the rally to 5375 [wave (x)] and the third wave is the last zigzag [(a),(b),(c)] ending near 5100. The entire correction is called a double zigzag.

This simple observation last Thursday led me to conclude that the FTSE 100 would rally. That was a good call, thanks to the clear Elliott wave pattern.

To learn more go to www.eyield.co.uk

Last chance to get on board

2009-11-30T06:00:00.000-08:00

Dubai in the news for the wrong reason. This little paradise in the desert is not the real cause of the latest sell off. The banks and institutions are the real culprits. They are telling us to sell because they'll buy low.

This is not common knowledge, however, I believe that banks scared investors days before one of the most profitable months of the year, December.

In fact some banks have been buying big chunks of stocks last week, they know the market will rally, can't wait for Santa Claus to arrive!

There is no secret. even if you are not a bank, a simple observation of the FTSE 100 chart reveals potential profits in the next few weeks, see chart.

Of course there is no certainty the FTSE 100 will rally but the odds favour the bulls: the long term trend is up, fundamentals are strong, the pull back retraced a bit more that the famous 61.8% Fibonacci retracement of the preceding decline, we have a completed Elliott wave (counter trend), seasonal influence is positive and the BTI, a unique sentiment indicator, is about to turn bullish.

To learn more go to www.eyield.co.uk

Ending diagonal with impulsive pattern in first wave

2009-11-26T02:50:00.000-08:00

Ending diagonals are terminal patterns. They occur at the end of a move, either in wave 5 or C.

Ending diagonals take a wedge shape within two converging trendlines, the pattern is complete when there are five subwaves inside it, see pattern.

Each subwave should be in three, however, it has come to light that there is a variation of this pattern in which the first wave is not in three but in five, see chart.

Wave (i) is in five waves [i,ii,iii,iv,v] intead of the normal three wave pattern. It seems this is the same pattern currently unfolding on the FTSE 100.

To learn more go to www.eyield.co.uk

A rally to new highs

2009-11-24T04:22:00.000-08:00

The FTSE 100 is pushing to the 5380 level, will it break higher? take a look at the chart.

The FTSE rallied in five waves [i,ii,iii,iv,v] from the low on 20 November. A five-wave rally means the trend is up, the trend is a continuation of the rally from the November lows therefore last week's decline was a correction [(a),(b),(c)].

A possible scenario would allow for a continuation of the bull market until December. Wave i (circle) is over, wave ii (circle) was last week correction and wave iii (circle) up is now underway.

Because the timing indicators, 13-day BTI and Top 20 Differential, are near overbought, we expect wave iii (circle) to be shorter than wave i (circle). This pattern, where the third wave is shorter, would be an ending diagonal. It's too early to confirm the pattern but there are not many alternatives, in the short term prices should rally to 5430.

To learn more go to www.eyield.co.uk

A long term breakout on Reckitt Benckiser

2009-11-20T06:22:00.000-08:00

News that Reckitt Benckiser is thought to be in merger talks with Colgate-Palmolive sent the share price into new highs. The move follows a long term breakout, see chart.

In general, long term breakouts of either support or resistance, or any pattern such as triangles or head and shoulders, are accompanied by short term pull backs.

This is because the short term pull back is a subwave inside the wave of larger degree (the long term wave) and, as a result, will retrace a portion of the previous subwave before resuming in the direction of the wave of larger degree. Unfortunately the breaking of the long term trendline may happen at a time when the internal subwave is nearing an end, therefore going long on the breakout may result in the position being stopped out on the pull back.

This is why, after a long term breakout, it is preferable to wait for a pull back before going long. As you can see on the Reckitt Benckiser chart, prices broke out at the end of September to reach 3170. The ensuing pull back to 2970 provided an opportunity to buy.

To learn more go to www.eyield.co.uk

A potential double top in Real Estate

2009-11-18T01:35:00.000-08:00

The double top is a reversal pattern. Prices make a new high, then pull back. The next move is a rally back to the top but this time prices fail to make a new high. This is precisely where the Real Estate sector is, see chart.

In a double top, prices should pull back a second time back to the support line at 1904. A break below the support line would constitute a downside trend reversal and complete the pattern. A price target is calculated by projecting the depth of the pattern from the breakout point. In this example the target would be 1590.

To learn more go to http://www.eyield.co.uk/

Last push to new high

2009-11-13T05:02:00.000-08:00

The FTSE 100 broke into new highs yesterday, the trend is nearing an end, see chart.

The bearish divergence between the BTI and the FTSE remains in place. It is now ten days since the FTSE started to rally, yet the BTI is still declining.

The FTSE must turn down soon otherwise there is a risk the BTI will turn up. A rising BTI would be bullish however, at this stage of the rally a rising BTI would not be significant because the Top 20 Differential is overbought and the 34-day BTI is negative (bear market).

We are already in a bear market, according to the 34-day BTI, the FTSE may push moderately higher today but the odds of a decline are increasing as the Top 20 Differential is now overbought. This is another piece of evidence that the FTSE is near a top.

The BTI is a sentiment indicator used to assess the mood of investors. When the daily change in the BTI is down sentiment is bearish. When the daily change in the BTI is up sentiment is bullish. The BTI is used to assess the near term direction of the market and confirms the Elliott wave count.

To learn more go to www.eyield.co.uk

BT breaks up

2009-11-12T08:42:00.000-08:00

Today BT Group shares surged by as much as 5%. The move was triggered by a positive announcement this morning, in particular, the company raised its full year cahflow target after cutting jobs.

While no one can predict the outcome of any announcement, the chart's pattern over the last two months was bullish, see chart

We discussed HSBC the other day, today we have another pause in the uptrend pattern in BT. Consolidations or pauses in the uptrend are generally sideways moves in five waves [A,B,C,D,E]. Now observe wave B and D, they are both in three legs [a,b,c]. This is what you would expect in a consolidation. If it was not a consolidation, prices would continue to move up in five waves but here these small rallies are in three legs and are followed by a pull back.

The third pull back which is wave E marks the end of the consolidation. This is where you would buy.

To learn more go to www.eyield.co.uk

A pause in the uptrend

2009-11-10T07:33:00.000-08:00

HSBC Holdings, Europe's biggest bank, said third-quarter pretax profit rose as bad loans declined. Profit was significantly higher than a year ago.

The stock was up 3.8% at 3.05pm. Today's rally could be the initial move of a short term rally. A similar pattern occurred in mid July, see chart

Note the similarity between patterns preceding the start of the rally in July and today. The pattern is a consolidation where prices decline slowly in a tight range. These moves are consolidations because they tend to occur prior to a sharp move up.

If history repeats itself the stock should continue to rally, the only difference today is that the current move is a fifth wave, it should be shorter than wave 3.

To learn more go to www.eyield.co.uk

Bank stocks in a bearish pattern

2009-11-09T06:14:00.000-08:00

UK stocks rose for a fourth day led by miners. Bank stocks are still diverging, see chart.

Note the bearish divergence (declining relative strength line) since August on the lower chart, the FTSE is trading higher but the Banking sector is more or less at the level where it was in August. When the banks lag the FTSE is unlikely to rally further.

Today's counter trend bounce in the FTSE could easily turn into an impulse wave, however, for some reason the formation of a potential head & shoulders pattern in the banking sector supports my view that the rally is a counter trend.

A head and shoulder is a bearish pattern. The pattern will be complete when prices break below the neckline. This level is currently 4687. If this is the correct pattern then expect a break below 4680 in the next few days. A falling banking sector would drag the FTSE lower.

To learn more go to www.eyield.co.uk

The return of the bear market

2009-11-06T03:35:00.000-08:00

From now on we are in a bear market, that's according to the 34-day BTI.

The 34-day BTI is used to assess the main FTSE trend. When the 34-day BTI is positive the FTSE is in a bull market, when the 34-day BTI is negative the FTSE is in a bear market.
The indicator became negative yesterday. In addition the BTI, an indicator measuring investors mood, is still declining at a time when the FTSE is rising. This bearish divergence is a common feature of bear market rallies. In a bear market, rallies should be accompanied by declining BTI which is what we are seeing.

It has to be said that the news has been good recently, yesterday's manufacturing output in the UK and jobless claims and productivity in the US came in better than expected. Today's big news is the US nonfarm payrolls at 1.30pm. If the figures are good the market will spike, this would provide a good entry level to go short.

The FTSE may move moderately higher today but in the near term the trend is down, see chart.

To learn more go to http://www.eyield.co.uk/

The difference between Buy and Strong Buy

2009-11-04T04:56:00.000-08:00

The WMI gave a "buy" signal on 2 November and a "strong buy" signal on 3 November. Here we have a good example of efficient trading using the WMI.

The most accurate readings occur when the indicator says "Strong buy". The strong buy came yesterday at 9.55am when the FTSE 100 was trading at 5,000. This proved to be an excellent level to go long, as I write the FTSE 100 is trading at 5,080.

Since a "buy" signal is equally a signal to go long, according to the guidelines you should have gone long from 5,075 on 2 November with a half position and yesterday you should have added the other half at 5,000. Your average price would be 5,037 and your position would be showing a profit right now.

You can take a full position on a "buy" but it is not recommended. As you can see it is preferable to take a full position when the signal is "strong buy". In the above example it worked very well.

More about the WMI, click here

To learn more go to http://www.eyield.co.uk/

The trend is down

2009-11-02T05:22:00.000-08:00

When a decline is in five waves, the trend is down. This is the theory, in practice it is not as simple as that.

A problem with Elliott wave is that it is often late at identifying the main trend, or it can sometimes lead to errors depending on which degree of trend is being looked at. For example: a five-wave rally may suggest that the trend is up, but in reality the situation is more complex. A five-wave rally could be a countertrend move in a long term bear market. Assuming the trend is up because the rally was in five waves, in this instance, would be a mistake. This observation and subsequent research led me to develop the BTI or Bullish Trend Indicator.

The BTI is a sentiment indicator. This unique indicator tells us whether investors are bullish or bearish at a specific time, regardless of the state of the fundamental news. This is an important factor, for when investors are in a bearish mood there is a high probability that the market will fall.

Furthermore, when the BTI is declining (bearish mood), the FTSE should decline in five waves as shown on the following chart.

The BTI turned bearish on 16 October. It was a good call as the FTSE turned down soon after, the decline was in five waves as expected.

To learn more go to www.eyield.co.uk

Good news in a downtrend

2009-10-30T04:45:00.000-07:00

US GDP pleased the market yesterday. The S&P 500 closed up 2%.

What's next? First, it appears that a downtrend is well underway, see chart

Beside the Elliott wave count, a short term trader would assume that the trend is down. The rally caused by the release of the US GDP yesterday is a counter trend rally.

If you believe that the trend is down, the counter trend rally provides an opportunity to go short. We'll see how things pan out at the open but according to Elliott wave analysis the decline should continue.

One way to get the direction right is to use the BTI, our unique directional indicator. It became bearish on 16 October and is still pointing down.

To learn more go to www.eyield.co.uk

Is there enough appetite for equities?

2009-10-30T00:44:00.000-07:00

The behaviour of the BTI changed because expected decline failed to materialise, see chart.

When a decline does not occur within a limited period of time, investors regained confidence and we have a situation in which the bulls have the strong hand.

The fact that the FTSE made a new high on Friday supports our view that the FTSE will continue to push higher in the near term prior to making a top. Even the surprise drop in GDP did nothing to stop the rally.

Obviously the good US existing home sales numbers helped the market and there is a willingness to buy at these levels, but we must not get carried away, the market will probably continue higher but we are near the top.

Our timing indicators are approaching overbought and the wave count is near the end, we are in the final stages of the rally.

To learn more go to www.eyield.co.uk

2009-10-12T05:35:00.001-07:00

A busy week starts with market heavyweights Intel, J&J, Google, Bank of America and GE all reporting earnings.

On the economic front we will have latest reports on US retail sales, consumer price index and industrial production. Bull trends often ends on good news so it is possible that this week could be good in terms of news, but the market may stall and reverse. An example of such behaviour occurred on 23 September when the good news pushed the market to new high, that proved to be the top, see chart.

There is still a bearish divergence between the 34-day BTI and the FTSE, once again this behaviour is associated with a market which is near the top. For this reason there is good chance the FTSE's rally will end this week. In the near term however, prices are likely to rally to 5300, see:

http://www.eyield.co.uk/wavematrix/examples/ftse_1001.htm

To learn more go to http://www.eyield.co.uk/

UK Real Estate

2009-10-08T10:35:00.001-07:00

It looks like the UK Real Estate sector has turned down, see

http://www.eyield.co.uk/wavematrix/examples/real_estate091008.htm

In terms of Elliott wave analysis, the rally from the March lows is a counter trend in three legs A,B,C. Correction are in three waves so here the main trend is down and the correction is upward. In a correction wave A and C are in five waves [i,ii,iii,iv,v] as shown on the chart. This is a textbook zigzag and if correct prices should not return to the top, the long term bear trend has resumed.

More research at www.eyield.co.uk

Let's start spread betting

2009-10-07T03:42:00.000-07:00

Unlike traditional investing, spread betting enables you to make geared trades. When you spread bet on shares you can invest up to ten times the amount of money you have in your spread betting account. For indexes such as the FTSE 100 the exposure is even greater, up to 20 times the money you have in your spread betting account. As a result any gain you make on a single trade is magnified. If you have £100 in your spread betting account and buy the equivalent of £1000 of shares and the shares go up by 10%, you've made £100. An increase of 10% in the underlying stock translates into an actual return of 100% or ten times greater.
To learn more check http://www.eyield.co.uk/