FTSE falters
The only bright spot for me has been the Nasdaq 100, which blasted 2.8 per cent higher on Monday. That's just the sort of move that usually kicks off a larger rally. And leadership from the technology index is typically a good omen for equities more generally. If this index can now break upwards through its 55-four hourly EMA in style, I will buy it once more, hoping to ride a move perhaps up to 2635.
Nasdaq Recovery Target
I had an email from Trevor Henwood enquiring about the levels I quote in my daily market outlooks, which are published on our website each day. Trevor - who uses the ShareScope software package - isn't the first reader to ask me why the level of the FTSE's four-hourly moving averages I cite do not match the ones he can see plotted on his own screen. He spotted that an average on my chart situated at 5283 was showing at 5350 on his, a pretty material gap.
FTSE's cash levels
The charts I display are spread-betting charts, which come courtesy of IG Index. I use these charts partly because they are freely available to anyone who opens an account with that firm, whereas something like ShareScope requires a subscription. Spread-betting firms quote the FTSE and many other equity indices on a 24-hour-a-day basis. By contrast, ShareScope shows the FTSE's cash price, which only appears during London's normal market hours of 8am to 4.30pm.
FTSE's 24-hour levels
Clearly, this makes a big difference. The spread-betting firms' charts include some fifteen and a half hours of extra price action each day. All that additional data obviously affects the calculation of things like moving averages and other technical indicators. However, containing more price data does not necessarily make the spread-betting charts superior. Indeed, it might even make them worse.
I've had this debate more than once with my trading pal Steven Mayne (www.egrbroking.co.uk). He only uses the intraday charts based on the cash price in his own daily research. He argues that the price action that really matters is that which occurs when the market is at its most liquid, i.e. during the daily session. "The most important prices of each day are the actual London opening and closing prices. What happens to FTSE futures in Asia at 3am is of little consequence," he says.
As a spread bettor - and one who is writing for the benefit largely of other spread bettors - I simply feel it makes more sense to use spread-betting prices. While the cash price may be more 'genuine', the prices that I mention are ones at which I and others can actually enter and exit trades. It may be worth cross-referencing these prices with the cash charts, but it's not essential. I certainly won't be losing any sleep over any disparities. As it is, I lose enough shut-eye by checking my positions in the wee small hours in case I've been stopped out by some funny move in Singapore!
**Dominic will be presenting at the London Investor Seminar on 18 June - book your place today.**
