Today was an absolute shocker on the markets with the FTSE100 falling near 3% after a couple of weeks of similar falls. What really concerns me is that it appeared Support for the FTSE100 price was building at 6300 but that failed today. In addition, the Relative Strength Index (RSI) was already very low below 30 and the price has been sat on the bottom Bollinger Band and continues to fall. You would sensibly expect a rally with such Oversold conditions - this has been the pattern for probably the last 2 to 3 years. However, something seems to have changed - we have had heightened levels of fear for many days which usually leads to a rally. It seems now that Traders are desperate to dump shares and are accepting lower prices to get rid of them. Buyers are only interested in buying after big markdowns.
This feels like back in 2008 when people just lost their marbles with regard to value and just ditched everything. I have great stocks on low p/es and big divvys but they are getting hammered - it is indiscriminate and smells of panic. Following on from my last Blog where I lamented taking off my Short position, I have been very wary of going short only to find that the market rallies. But at the moment any attempt by the market to rally is getting murdered. I do not want to sell great stocks - by the time the market rallies (it will, but might be some time off) I could easily be 10% behind while I figure out what to buy back and do the actual trades. In addition, Transaction costs would be high of such action. What really spooked me today was the news about Greek Government Bond Yields hitting 7% and the Greek Stockmarket getting hit 8% - this is very like 2008 to 2010. I am not worried about Ebola - I think it is usual Media panic / fear nonsense and is irrelevant to the markets (obviously not for the poor people concerned, I hope they will pull through). Anyway, I put on a small FTSE100 Short at 6193 - it is equivalent to about 15% of my total Long Exposure. However, I have about 40% of my Long Exposure as leveraged Spreadbets so when this falls it hurts. This FTSE100 short is about 35% of my Long Spreadbets - so this will help me if the markets keep tanking. I have kept it small (in theory I could hedge 100% of my Long Spreadbets) because I find that my mix of FTSE100, 350, Small Caps etc. tends to behave very different to the FTSE100 - so you get horrible situation where my stocks fall and the FTSE100 rises, and it kicks me in the butt. IGindex trades FTSE100 out of normal market hours - so I was able to put on at around 6.15pm ish. It really is Insurance - if the Markets continue to fall, it should ease the pain a little - and if things look worse, I could add a bit more Short. I would probably close the short if FTSE100 goes over 6500 - so the money I lose on this (300 points) would be the Premium for my Insurance Policy. I will revisit this 'stoploss level' over next couple of days and try to set an appropriate level - it will be manual, not a Firm Order in the IGindex Spreadbetting system - I want flexibility. I am not going to buy many stocks in coming days, so I can focus on this FTSE100 short.
0 Comments
Leave a Reply. |
'Educational' WheelieBlogsWelcome to my Educational Blog Page - I have another 'Stocks & Markets' Blog Page which you can access via a Button on the top of the Homepage. Archives
January 2021
Categories
All
Please see the Full Range of Book Ideas in Wheelie's Bookshop.
|