Recession yet ftse rallys?

Don't understand it, UK in recession yet Dow and Ftse rallys 200 pts and stocks like Marks and Spencer and housebuilders rise while small oilers like leed petroleum whch are sure bets falls! Frustrating.

I spent quite a few hours today trying to pick reversal points on the FTSE, all to no avail! A real lesson for me in trading what you see, and not what you think, or what the fundamentals suggest should happen.

Good thing I sill use a demo account

I'm going to open a short spreadbet position on Monday, Hopefully the market will react to this on Tuesday open

Guys, remember that if you've heard it in the news its already too late to trade it. You can do that with the type of news that creates slow reactions as more an more get on it ... but be sure its that kind of news before you place your bets.

Good luck.

You should know by now there are no sure bets in these markets. Some of the oils were up on friday - mine were as much as about 17% at one time. (although this was down to micro reasons.) It is a strange rally on such news and the ftse is back to that 5500 area which i've always considered a pivotal point for the markets in the last few weeks. I suppose one aspect behind the rally in housing market is people expect the MPC will cut rates to stimulate growth at the next meeting - and of course a cut in interest rates helps the housing market too.

I think its better to get a feel for the market and what news they really react to.

ft.com is a good place to start or marketwatch.com

Thursday / Friday were hugely interesting days, the dollar fell on Thursday meaning it became cheaper to buy oil, hence a rise up to $121 from around $116. Gold also rose from around $802 upto $836 i think..

So commodities has a good run as the dollar was cheaper, holders of other currencies were in a stronger position to buy these physical goods. Also you had the geopolitical tension with Russia fuelling oil and gold is seen as a bit of a safe haven when the equities start to teeter as they did from Monday on.

So what does this mean? the Dow is closely correlated to the price of oil however Thursday it didnt seem to pay much attention to the huge rise in oil! It had found some support around the 11380 area and come Friday the dollar started rising at 8.00 GMT when the pound fell sharply on the news you mention.

So the dollar becomes stronger, oil becomes cheaper, there was strong news from the financial sector (lehman takeover - which was bull, someone obviously paid reuters to make it up) so there was a strong base for a rally. The FTSE follows the dow fairly closely, a lot of bad news has already been priced in....

by the end of the day the dow was up to 11600 odd and oil had fallen back to $114 with gold at $822.

So what about the FTSE in all this? well the pound is cheaper so our exports will do well, the price of commodities had shot through the roof meaning our miners and oil companies were strong, we had strong news from the banking sector (lehman rumour, buy the rumour sell the news..) in america so that was strong. you can get a breakdown of the FTSE online from various places and you can work out if the various constiuents of the various sectors do well you can work out what the FTSE will roughly do.. think the top two are commodities then banking..

this is my take hope it helps...

The rally was caused entirely by news and in all probability will be temporary in my view.


Paul

Check out the moves yesterday of some of the miners in the ftse 100 such as Rio Tinto, Kaz, BHP - their moves were nothing interesting at all. I can't see yesterday's rally being due to commodities. Whereas the banking stocks saw 5%+ increases yesterday as did some of the housing companies such as PSN, BDEV etc. I'm more inclined to think it's an interest rate cut speculation on flat growth. But with the economic picture in mind, the ftse short is going to be obvious. It's got a long way to go down.

There was specific news on Friday initiated by Warren Buffet that caused the Dow futures to jump instantly that it was announced and it was not speculation of interest rate cuts. Once the Dow rallied the FTSE followed suit.


Paul

dow now falling all over the place down approx 200. I am still convinced that based on the charts it will dip on leg down again to around 11000.