Market Overview

[Bloodhound]

Hi there,
Any help / comments would be greatly appreciated. I am spreadbetting and swing trading FTSE 100 - 250 stocks....
As part of my weekly plan should I be trying to gauge which way the market (FTSE100) is likely to move during the week before placing long / short bets? I had read that 3 out of 4 stocks will always follow the market and that it's not a great idea to go long if the FTSE is going down??
Should I be basing set-ups around this top-down approach or just focusing on the individual stock?
Hope I'm making sense.
KJ

 

[UKtradergirl]

Hiya,

Hope you are doing ok

It's all very well 3 out of 4 stocks following the general direction of the FTSE, but this depends on your ability to predict the market direction of the market in the first place. Great when things are going your way, but when you make a bad prediction does this mean that you end up losing 3 out of 4 times?

So i think the answer is, it could be a good way to go but watch how accurate your FTSE100 predictions are. Knowing which way the market will go one day in advance is hard enough, so i wouldn't attempt to try to outguess the market for a full week.

Also look at how stocks are weighted in comparison to the FTSE100 index. Most of the movement in the FTSE is accounted for by a small minority of the top 100 stocks due to weighting.

I hope some other people come here and answer you in more detail since this really is not my strong point!

 

[Bloodhound]

Hi there,
Good way of looking at it. Given that I can't get 1 stock going the right way then I doubt I can predict the market ;-)

Possibly the question is born out of just watching stocks that I think are going to go one way, seeming to go in the opposite direction (which tends to be the way the FTSE goes!!).

KJ

 

[Shanghai]

I have been having it drilled into me recently that I should be considering the market internals more closely by other trader friends so that is what I have been doing. Under normal circumstances I've been finding this a very useful exercise, however the market at the moment is not exactly normal and is driven by all sorts of stuff at the moment.

Typically what I will do on a weekly basis is to bring the monthly, weekly and daily charts of the FTSE. This is a quick way to see which way the long, medium and short term trends are, mainly visually. However I use an oscillator to get an idea of how overbought or oversold the market may be.

I also look at the MacClellan Oscillator to also get a view of how overbought or oversold the market is. And finally I add the summation index to see if it is trending up or down.

Of course often the signals given will be contradictory but on the occasions that they are not the market often moves as expected.

For example this week the indicators showed that the longer and medium term trends were bearish whilst the shorter term trend was up but overbought. Hence we could expect a few days this week where the market would not head in one direction or the other whilst the overbought conditions were worked off.