Markets continue to be range bound after a rather half hearted attempt at the downside on Friday was easily defeated yesterday.

The FTSE has reconfirmed the support at 5180 and this morning has hit 5333 which has been the restrictive high for the last few weeks with the range at 5375 to 5400 being the barrier higher up. Sentiment seems to oscillate backwards and forwards as the end of year dynamics start to enter the equation. Year end window dressing is a well recognised event and has caused many a blip higher in the last week or so and investors may be waiting on the possibility of this happening again.

The S&P is also within striking distance of the highs with the current price at 1116.5 just 3 points off the peak while the Dax is probing into new territory having cleared 5900 yesterday. All the signs are inplace for a break out to the upside… the problem is that we have been here before several times and have failed on each occasion.

Traders are selling at these levels looking for a repeat of previous failures but a break above 5400 in the FTSE, 1120 in the S&P or 10520 in the Dow might see some solid covering buying.

In the currency markets the Dollar is continuing to regain lost ground but is, in truth, still in the ranges set up over the last six or seven months. Versus the Yen we are now at 91.25 up from the lows last month of around 85.00. There is heavy resistance between 91.75 and 92.35 but it must be said that the current momentum is in the dollar’s favour. The recent rally has been very sharp and is showing support at 89.55.

Against the Euro the indications are similarly bullish with the major support at 1.4400 having been broken last week. The Euro seems to have a whole host of other problems as well which might well give pause to any rally strong buying emerging in the medium term.

The Pound has its own problems as well and the decision by S&P to downgrade UK banks as a whole yesterday will not make things any easier. Long term there is a huge credibility issue over the political appetite to take the hard decisions that will be needed in the New Year. Sad to say this is where the UK’s version of democracy is found wanting. A Parliament mainly made up of people with virtually no other source of income than being an MP has led to 12 years of populist policy making. This state of affaires is unlikely to change even if the Tories win an outright majority.

Gold remains weak as the dollar regains some strength and we have now broken down below the support levels mentioned last week at 1110 and 1000. We will be looking to see if we can regain some of this but it must be said that with a more stable greenback in the offing one of the main planks of the Gold Bugs is being kicked away.

Oil remains rather undecided after the weird action in the January contract caused something of a poser. February Nymex was 2 dollars above the January contract at the close indicating immediate oversupply but expectations that said surplus will not run for an extended period. Traders might be concerned that we saw this same type of action through the end of last year and into the first quarter where each new contract was trading considerably higher than the previous one only for the price to drift down to the prior levels.