Decision day is looming for Kraft in the Cadbury battle but the position is really difficult for them and for shareholders. The main problem for those with equity is that there has been no rival bid appearing over the horizon so if Kraft do not increase their price or go aggressive then the whole thing might fall apart. The analysts have been saying that Kraft must bid up to 850 or 900p for the stock but is this really likely? For all of the reasonable numbers from Cadbury yesterday (and there was probably a bit of massaging going on) if Kraft walk away then the stock will slump back to around 600p but Kraft are probably wondering (in the absence of any competitor) why, at this point, they should outbid themselves. There are a great number of examples where the incumbent board has persuaded investors to reject a bid. Nearly all of them have failed to deliver to stock holders anything close to the rejected price for many, many years. With the 9th November bid day approaching investors will have to weigh the potential up side of perhaps another 100p with a downside of 200.

Yesterday was one of those days that makes the bookie tear his hair out as our clients bought into the early weakness in the indices, watched the sudden move higher (for no reason at all), took profits and went short and then saw a sudden shift lower (again for no reason we can see) and made a bunch on the way down as well.

This morning sees the FTSE down below 5200 again but we have been here before and our clients do not seem too concerned at the moment. There appears to be solid support at around 5165 (we hit it last night and early this morning) and punters have been buying in a steady stream. 5160 is also the support from the medium term trend line going back to July so (while there appears to be some confidence) it would be advisable for some caution if the level comes under pressure.

The Dow has also given up the 10000 level (which is a pity as it was a nice round number) but we are still within striking distance of the level so it would be surprising if there was any panic just yet.

In all this it must be admitted that, while equities remain attractive versus everything else, we have not had a serious pull back for quite some time (the fall through June and early July comes to mind but even this did not seem particularly violent at the time). If the sellers get some steam up there is quite a bit of room to the downside (4950 and 4800 come to mind in the FTSE).

Sterling had another stonking day yesterday but is suffering a bit for it this morning as the dollar tries to put in at least an attempt to rally. The resistance in Cable at 1.6650 held very well yesterday and seemed to confirm the trading range that has been in place since May of approximately 1.58 to 1.6650. While we did break out back in August up to 1.70 the move only lasted a few days before gravity came back into force. Today is seeing the cross back at 1.6560 and frankly not looking too confident.

The Euro managed to break above the 1.4966 resistance yesterday pushing all the way to 1.5050 but this morning we are back down below the mark once again at 1.4955. The continued inability of the Euro to make any further headway versus the greenback is starting to look worrying and our clients seem more confident than usual in building short positions.

Oil surged to 82 dollars yesterday on the back of the weakening dollar but with the fightback this morning and the weakness in the equity markets there has been something of a retracement and we are back at 80 dollars once again. Clients stuck to their guns yesterday holding shorts through the rally and they are reaping the reward this morning. We may find that 80 bucks becomes the new central point for the moment as undoubted economic growth comes up against an apparent abundance of Oil currently held across the globe. 85 to 90 dollars is still the target for many bulls and it will probably take more than the odd down day to dent this opinion.