A bit of excitement in pre-market trading where what appears to be either a fat finger error or a big short ‘liquidation’ in the US futures pushed the Dow up 40 pips and the S&P up 5 big figures in a couple of seconds. All the other markets followed suit to varying degrees as dealers tried to work out whether there had been a piece of news but since then we have slowly drifted back down again. Not quite to the original starting point as there are still lingering fears that there might be ‘something out there’.
The FTSE looks to be opening around the 5165 region another 40 points higher than yesterday’s close and even my wife was asking whether we ought to be investing in something. I am trying to work out whether my spouse equates to the eponymous ‘shoeshine boy’ of the great crash.
Kingfisher have come in with better numbers than forecast with sales up by 1.4pc with the UK and Poland (!?) performing well. The stock has had a stupendous 2009 to date although the most recent rallies seem to have passed it by somewhat. Hard pressed holders who had been castigating the board for years have a least got something to cheer about this year. The stock seems happy around the 210p level, we have been here for two months now, and actually bottomed out in July last year well before both the October and March collapses. With the debt burden greatly aided by the current base rates the company may well give better bottom line returns for some years.
Trading was fast a furious yesterday with punters continuing to try and call the top and suffering in the glare of the steady grind higher. And ‘Grind’ does indeed correctly describe the activity over the last session. The market just kept on going all day with the only real sharp reversal coming in the last 10 minutes before the close at 16.30 (only to be reversed in the next five minutes on the futures market after 16.30). As mentioned in yesterday’s comment we had breached the major resistance at 5070 and readers should have been wary of attempting to oppose the move. For those looking for further resistance levels 5210/20 seems the closest with 5250 (about) being slightly more solid. Of course the higher we go the greater the chance of some pill back and the bears might well take some heart from the possibility that the move higher yesterday may prove to be a false break. Dealers will be eyeing the charts for evidence of a return to the 5050 level and if this does happen then 4940 looks to be the target.
The dollar is weakening in early moves and this is helping to maintain the latest oil move with Nymex now back up to the 72 dollar level. 73.20 seems to be the target for the bulls at the moment with the obvious 75 buck high of August being the long term aim for the producers. Inventories fell sharply last week but distillates actually rose this might be an indication of reduction in demand on the ground or obviously a slowdown in crude delivery versus processed product. We are entering the winter delivery months for the US and can expect further wild moves in the price as the weather creates its effect. The hurricane season seems to be going with a whimper in the Gulf of Mexico and ‘insurance buying’ against a disaster may start to unwind.
Gold is continuing to move ever higher and the lack of any real move in the US session last night after the Europeans took us up in the morning might be seen as confirmation of an acceptance of the break out. This morning, and gold is another 4 bucks up sitting on the 1020 level having hit 1024 overnight. To be fair this does not actually mean anything very much other than being the high since last year. There will be a cheer if we manage to touch the high of 1029 but traders may be worried that we are back in the Asian buying and European selling scenario.
As mentioned the dollar is weakening again with the Yen eying the 90 cent level once more. 90.10 to 90.30 has been the lows on three of the last four days and with the cross now at 90.56 off 30 pips overnight dealers will be wondering if another test is in the offing. A failure to break lower today may well bring out the buyers but bears are eyeing the lows of 87.10 which we hit twice last December and January. Sterling/Yen is forming large tails with small changes on the candlestick charts and this is generally an indication of an imminent move. The current trend would suggest that the favoured direction would be for further sterling weakness but traders are naturally wary in a market of such violent shifts. Resistance to the upside is at 150.60 to 151.00, support at 148.50. With the price now at 149.90 either direction appears equally likely.