Latest Developments in Spread Trading Spectrum

Latest Developments in Spread Trading Spectrum
November 30 06:31 2016 Print This Article

FTSE 100 is still aiming at 6800, which means since moves to hit this level have been unfruitful since last week; any move towards it this week will lead to new selling. It has been apparent that from early November, there have been vicissitudes along. Now, if the price happens to drop anywhere below 6750, or worse go down to 6700, there could be a swift switch to 6612 and below. To be on the safe side, any rally must hit 6800, aiming up towards 6939 or 6997 if possible.

For DAX, things are not as good as all attempts to break 10,800 have proved futile since August, with the e same being experienced in last week. The Index has been facing downwards for quite some time now, with a Simple Moving Average of 10,662 offering some support. If the dollar gives space to the euro, it is expected that a downward move may ensue, dropping below 10,600 heading down to 10,446 and possibly all the way to 10,200 where the market was towards the end of September.

In the case of S&P 500, the Index is struggling but making a positive move with a move above 2016 proving difficult. At the same time, 2195 highs still stand way beyond reach, with the top trend line apparently sealed.3

Meanwhile, the USD has is continually claiming its domination in AUD/USD, even though AUD/CAD suffered a major loss by 32% last week. It is speculate that AUD/CAD will still trade lower, especially towards OPEC meeting on November 30. Further, the market is apparently unshaken by the probability of oil cartels cutting on production or not. Further, afield, as FX and commodities as well as fixed markets are becoming more volatile, it is expected that the trend is not going to change for any better. ASX 200 went unchanged over the last week, with SPI futures at 7 points high on Friday, which means a better open for all sectors. BHP and ADR are well a satisfactorily high, but with coal, iron ore and steel futures dropping by 3.1%, 4.6% and 4.2% each, on the same Friday night, BHP could have a hard time in its call, probably experiencing a significant drop.

Looking into financials, GBP/USD is targeting $1.2477, with the decline being persistent, dropping from 11 November’s $1.2650 to hit support around $1.2322, formerly recorded in October. Any further decline could mean going back to late October lows of $1.2114 where the two hit the bottom. For any move in the positive direction to be achieved, a rally needs to clear $1.2477.

EUR/USD could go back to March 2015 low level after dropping by 5% over the last three weeks. There will have to be a move beyond $1.0750 for any new level to be set. However, buying EUR/USD is now better than it has ever been since the second half of October. If the price moves anywhere below $1.0550, then this bullish trend will be overrun.

Elsewhere, as OPEC members gear towards a consensus to effect production cut before their meeting in late November in Vienna sets in, oil futures are trading high. Crude oil price jumped clear 14% to almost $47 per barrel; following Iraq’s oil Minister’s positive comment coming through over the weekend. The same came from his Iranian counterpart, who suggested possibility of a deal on the quest. However, the proposal to freeze oil production has seen a major challenge from the cartels dithering to comply despite giving their promise to do so.

Forward to stocks, Facebook has confirmed that it is planning to buy back shares worth of $6 billion in the first quarter of 2017. This move, which includes Class A common stock, has been termed by many as aimed at paying workers more than enriching capitalists. Facebook has $26 billion in cash and marketable shares, from which the buybacks will be made, besides planning to increase its spending to boost growth of the business. However, this is reportedly a case of shareholder dilution, which can mean a fall in the value of stocks. This is also claimed to be risky for the management, especially in a case whereby the stock value is significant when compared to the total company value.

Stock buybacks are a typical norm in many mature businesses facing a slow growth. They make a company’s earnings better off through reduction of outstanding shares.

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Demarco Gonzalez
Demarco Gonzalez

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