New monitor predicts trade behaviour
Cape Town - SA's first retail investor futures monitor shows investors were confident on commodities in June but bearish on euro and equity markets.
Results of the inaugural Global Trader Futures Monitor (GTFM), which measures the futures trading behaviour of more than 6 000 South African retail investors on a monthly basis, show a significant shift in trading activity from equity index futures towards currency and commodity futures in June.
Trading data from of all retail investors on Global Trader’s GT247.com, an online trading platform, was used to compile GTFM over the month.
The data showed the broad asset classes investors are trading (commodities, equity indices, currencies) as well as the positions or directions of their trades within individual instruments.
The value of futures trades in commodities recorded as a percentage of overall trades showed a significant increase to 24% in June, from 14% in May, said Andrew Kinsey, head of risk at Global Trader.
“The jump in commodities trading can be attributed to the general sell off in commodities during June. Online traders are often contra-traders, meaning they were aiming to buy into falling markets and sell into rising markets.
"This was highlighted by the fact that 71.4% of trades in commodities were long, while the remainder was short in June 2012,” he said.
The GTFM also revealed that the value of currencies futures traded as a percentage of overall trades rose to 28% in June, up from 21% in May, with 48.3% of trades being long and the remainder short.
The value of equity index futures traded declined to 48% of overall trades from 65% a month earlier.
"This was largely due to a number of large clients closing out their trading positions in early June and not re-entering the market during the month," said Kinsey.
According to the GTFM, 49.4% of equity index trades were long and the remainder short.
During June 53.8% of the total number of euro/dollar futures trades were short the euro, while the remainder were long.
“The euro has suffered from negative market sentiment for a considerable period of time due to the ongoing eurozone crisis, though June 2012 marked a brief respite in the downward pressure on the currency,” said Kinsey.
"Online investors maintained their short position stance and increased that exposure when the euro spiked up into month-end.”
Of the total number of Brent crude futures trades during the month of June, 84.1% were short, while the remainder were long.
“Brent crude was under pressure for most of the month of June descending from approximately $100 per barrel to a low of less than $90 per barrel. This move was in most part due to souring sentiment on global growth prospects.
"Online investors regarded this move down as overdone, remaining almost exclusively long for the whole month, anticipating a retracement that occurred in part in the last two trading days of the month,” said Kinsey.
In June, 45.3% of the total number of Dow Jones futures trades were short, while the remainder were long.
“The Dow started off June 2012 with a large sell off in the first two trading days followed by a 7% rise into the end of the month.
"On a net basis, online investors were short the Dow for the whole period despite the strong market performance, increasing their short positioning on days when the market rose strongly,” said Kinsey.
Of the total number of Gold futures trades during June, 88.2% were long, while the remainder were short.
“Gold was relatively volatile within a broad $80 range (1 640 - 1 560) during June 2012. Despite this range trading performance, online investors were predominantly long on gold, reflecting a long held bullish bias over the last 4 years,” said Kinsey.
"This positioning is consistent with international speculative commitment that anticipates a resumption of the bull market that was truly explosive in the period 2009-2011.”
Of the total number of Alsi futures trades, 37.2% were short during June, while the remainder were long.
“The JSE: ALSI had a very strong performance until late in the month in June 2012, even establishing an all time high. The fall from this high was precipitous, registering a 5% sell off in a week.
"Online investors gradually increased their short positioning as the Alsi rose, essentially fading a widely anticipated top in the market.
"The short positions were under pressure for two weeks but got their reward as the market fell,” said Kinsey.
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