Archive for August, 2011

Panic over (for now)!

Wed, 31st Aug 2011 Leave a comment

FTSE-100 at 30th August 2011Well, the FTSE has stayed above 5000 and, having formed a spike minimum, seems to have started to recover. The panic over a US double dip has receded – people seem to be expecting steady, low, growth now. There is also an expectation of more stimulus measures which seems to be boosting sentiment. The Eurozone debt crisis is out of the headlines once again, but I’m sure it will be back. It is difficult to say how far the FTSE will recover, but I would have thought it should make 5600 at least. I am looking at a 1970’s style dip now; back then the FT-All Share index moved sideways for a year before slipping slightly for a while, then plummeting. Peak to trough, it fell around seventy percent and I think we could see this sort of drop again when the US does go back into recession.

I’m not betting at the moment as I don’t like going against the trend and I am not prepared to stump up the extra margin which I feel is necessary given recent volatility.

Categories: Betting

On further reflexion…

Sat, 13th Aug 2011 Leave a comment

FTSE-100 during credit crunch… I’ve also spotted a near 15% dip at the beginning of the credit crunch. Unlike in 1929 however, here the index bounced back to within a couple of points of the previous peak. Looking at the current chart in my previous post, you can see, though, that the drop was much steeper this time. I believe that the near panic that we experienced recently has changed the mood of the markets and that we are now in bear market mode again (where the bias is to react to negative news and ignore the positive), but, with many commentators regarding the current dip as a buying opportunity, I wouldn’t be surprised to see the FTSE hit 6000 again before dropping further. If this is what happens, then I wouldn’t expect a 1929 style crash, but I would expect this second drop to be faster than in the credit crunch as the market is now much more aware of the problem.

The P/E ratio of the FTSE stands at 18.2 (according to DigitalLook), with the index at 5320, not extreme by any means, but on the high side. I can see this value coming down to single figures if we get a double-dip recession and/or the sovereign debt crisis escalates. That would put the FTSE well below 3000 even without a deterioration in company earnings (which is likely in a recession).

The market seems to have assumed (up to now) that governments could borrow and spend their way out of a double dip, but finally seem to have come to appreciate now (in a “Look; the emperor has no clothes!” kind of way) that you can’t borrow your way out of a debt crisis. All that stimulus measures have done is put off the inevitable and make the eventual recession all the worse by building up much more debt in the last four years, meaning that the austerity measures will have to be all the more severe.

Categories: Betting

I think I was a bit previous!

Fri, 12th Aug 2011 Leave a comment

Looking back to the 1929 crash (data from Yahoo! Finance), I see a drop of around 15% prior to a bounce back and the crash proper. I think the same thing could be happening here:

FTSE-100 at 11th August 2011We’ve had a drop of around 15% from the peak and, today, it looks like a bounce back is beginning. I have sold my option at a loss with a view to trying again at the top of the bounce.

Categories: Betting

Time for a punt

Fri, 5th Aug 2011 Leave a comment

It seems it’s time to give up on my pattern and have a punt on a crash. I have bought FTSE August 4700 puts at 18.9 in the hope that the index plummets next week. This is highly speculative for three reasons:

  1. I’ve called a crash before and been wrong, though if the FTSE hits my target of 3500 (the 2009 low) I will make a 6000% profit, so I think it’s worth a go.
  2. the conspirators are adamant hat the FTSE will plummet next week and they rarely tell the truth (only when they know I won’t believe them).
  3. the options only have two weeks until expiry and will expire worthless if the index doesn’t fall below 4700 in that time.

With the apparent collapse in confidence in a US recovery and the threat of Europe-wide government defaults, I think the current falls could easily convert into a crash, so here’s hoping!

Categories: Betting, Lunacy

My pattern is still incomplete

Wed, 3rd Aug 2011 Leave a comment

FTSE-100 at 2nd August 2011Well, I’m still waiting for the index to get back above the moving average to complete the turn-around pattern I illustrated in my last post. The FTSE has fallen heavily again today and is presently at its lowest point since the Japanese earthquake. If it doesn’t bounce in the next few days, I’ll have to give up on my peak signal. It did briefly poke its nose over the line on Monday morning, falling well back again later, and I don’t think this counts, but it may be the closest I’m going to get.

The problem seems to be that the hoohah about the US debt limit has caused the market to finally realize that the US government doesn’t have a bottomless pit of money with which to stimulate the economy out of a potential double-dip recession. Whereas the market was quite happy to overlook any negative signs before, it now takes them very seriously, and, in fact, is rather worried about the effect spending cuts might have.

Categories: Betting, The Economy