The major US index markets came off last night in the pre-market open, and the FTSE and Dax followed suit. The Dow was down 25 overnight while the S&P was down 3.5 points. If anything, it looks like some of the profit takers may now be coming on to the scene and causing this move down, which is to be expected given the large move up we’ve had over the last few days.
The FTSE looks to be opening around the 5142 level, down 21 points on yesterday’s close, while the dax looks to be opening around 5717, which is down 15 on yesterday’s close.
Trading continued to be pretty fast a furious yesterday with punters continuing to try and call the top of the market. The markets again opened higher yesterday, and it initially looked like the FTSE was going to continue powering upward to test the 5210 level, and then move on to the more solid 5250. It got as high as 5185, before finally settling around the opening price for the day of 5163 – still some 40 points higher than the previous day’s close. That grinding feeling continued throughout the whole of yesterday’s morning and evening sessions, and it feels like it could continue for a little while longer, as people are still in the summer lull mentality. However, the old adage ‘the trend is your friend’ certainly seems to apply at the moment, with the FTSE showing little signs of giving up any significant gains. The FTSE closed up for the fifth consecutive day, amid speculation of improving earnings for UK companies, and a very strong up trend has formed. Bears beware – at least in the short term. However, if a correction to the downside does occur, then we could see a quick return to the 5050 level, and then beyond that to the 4940 level.
Nymex had a pretty lacklustre day yesterday. The weakening dollar continued to push Nymex higher early yesterday, from the low end of 72 dollars up to the near term target of 73.20, and then above 73.50. However, the announcement of higher than expected oil inventories later in the day dampened the upward momentum, and Nymex subsequently came off. Nevertheless, as mentioned yesterday, the 75 buck high of August is still on the radar. 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 too seems to be going with a whimper in the Gulf of Mexico and ‘insurance buying’ against a disaster may start to unwind.
Gold tried to continue moving higher early yesterday, reaching a high of 1024. At one point it looked like we could have tested the all time highs of 1032, reached back on 17 March 2008. It subsequently fell back from the intraday high to eventually settle around the 1013 level last night. However, all is not lost. Gold too has formed quite a nice up trend and it certainly feels like it could go back to the highs, if not higher. Overnight gold had a very quiet session and was down only half a dollar at 1012.5.
The US dollar continued to weaken yesterday, as measured by the US dollar index. It was down 65 points by last night against the basket of six major world currencies. However, within this basket there were some pretty interesting plays. The Euro was the biggest culprit in causing the dollar to weaken. This was possibly off the back of better than expected economic data coming out of the US yesterday, which spurred investors to sell the greenback and buy into the higher yielding Euro. Having broken through the 1.4720 – a level considered quite key by many currency traders – the Euro continued going higher to around 1.4740 last night. It subsequently came off overnight to 1.4707, but this still gives the Euro a very strong position. A nice trend has also formed in the Euro, and an upwards target of 1.4930 is possible, while if a reversal occurred, you would be looking all the way down at 1.4450 before you found any support. Sterling, on the other hand, weakened against the dollar late in yesterday’s session, and continued to come off overnight. It is trading around 1.6335, down 112 pips in the overnight session. It looks like some dealers and investors may now be thinking that given unemployment in the UK is at decade highs and other economic figures are a little lacklustre, now might be a good time to sell Sterling, before things get any worse. Another test down to the 1.6000 level could very easily happen again. While the Yen again failed to test the 90 cent level. It got as low as 90.50, before bouncing back up to above 91.00. It seems to currently be range bound between 90.20 and 91.60. Each of these levels would have to be breached before you could argue with any certainty which way Yen will go.