Markets seem unable to get away from testing the 5040 level but, conversely, just do not have the power to break through above 5050/5070 mentioned, quite a few times recently, as a major resistance level.
Over the last eight or nine months there have been a series of these levels in the FTSE where we seem to pile up against resistance, sometimes retracing quite some way before coming back addict like to the same point once again. Eventually of course the resistance has been broken in all cases but the dread for punters of being long at the high of the market remains a very potent one and generally drives the setting up of large short positions at these regions.
Not surprisingly our clients have been selling all evening, night and in early trade this morning in virtually all the indices especially as the Dow has failed once again to challenge the 9650 high. The news yesterday on the weaker than expected Money Supply in the US (commented on here quite frequently in recent months) has not dented the bullish tone one jot which is a tad surprising. We have mentioned several times that, if you take out the Quantative Easing injection from the data, bank lending in the UK is falling at a rather alarming rate but as with yesterday’s numbers it seems to be an unheeded phenomenon. On the plus side Wall Street did form a top hammer on the candlesticks which is often
After the falls yesterday morning there was absolutely no follow through by the early afternoon and although our clients made hay taking profits from Fridays short position build up they were quick to get back into their bearish bets as the FTSE climbed back above the 5010 mark. If we slip below this level (5010) in the morning session we will probably find further sellers but above here the positive sentiment remains intact.
It is rather boring to say it but the markets seem to have entered another of those ‘treading water’ regions where investors await reasons to either continue the bull run or fear a return to the dark side.
Oil is on a surge in this morning’s session but it is rather difficult to see any particular reason other than the fact that we have failed to follow on from the sell off of late last week. Oil seems to be building a stepping stone of ‘higher’ lows through the day sessions and Nymex now seems to have ample buyers below $68.50. Oil is showing the tendency over the last few months of taking every (even minor) pause for breathe as a trigger for a move in the opposite direction to the most recent action.
Gold is likewise a bit of a conundrum. Having made it to 1000 dollars we are all now sitting around asking ‘what next’. The closing support at 993 mentioned ad-nauseam over the last week proved to be the low yesterday but the resulting bounce was hardly dynamic either, peaking out at 1003 before gently drifting back below the magic number. This morning the Far East had another go at buying the Yellow Metal higher but once more the Europeans do not seem to want to join the party. I am left with the opinion that there is going to be a sudden major break out but, unhappily, at this point there seems to be no indication as to which way! Not a good environment to bet too heavily in either direction.
Sterling managed to hold to the 150 support versus the Yen mentioned yesterday and has bounced to the current 151.25 level. The recovery does not seem too exciting though so traders should beware of reading too much into it. Cable has also managed a minor bounce from the 1.65 level up to 1.6650 but is struggling to make headway. Sellers are lining up amongst our customers and their positions are building.