Markets have managed to recover from the lows of yesterday but the bounce can hardly be described as aggressive and we are risking further bad news impacting confidence.

Trading is very quiet as the excitement of the last few days begins to die down and investors try to evaluate the new levels.  As stock market crises go this one is really in its infancy but this has not stopped the usual suspects in the flight to quality section of investment assets from climbing to unheard of peaks.  The Swiss Franc, Yen, Gilts, Bunds, US Treasuries and Gold are all at (or flirting with) all time highs.  Even in the crises of 2007/09 they did not approach anything like these levels and we are left with the rather unnerving possibility that allot of people have either got it completely wrong or that the world economies are about to enter a very long period of recession/stagnation or low growth.

Markets are generally telling us something all the time it is just that it is often difficult to know what!

The FTSE is now at 5140 having pushed to 5070 in yesterday’s session before managing a small recovery.  The high/low so far today is encompassed by just 30 points (at 11 am) which gives some indication as to the general level of indecision.  We are building a minor support at 5125/30 but it also looks difficult just now to broach 5165/75 either.  So for the time being we look to be rather stuck and with no important data out from either the UK or the US it looks as though today might be a tedious period.

The Dow made several attempts to break below 10000 through Wednesday’s session but in the end the effort proved too much and we closed marginally higher where we remain this morning. Clients are still buying into any falls and so the afternoon and evening session came as something of a relief! It is tempting to suggest that the 10000 level (merely on a psychological factor) remains critical to confidence. A close beneath this point might well cause further weakness (the same could be said for 1050 in the S&P).

Corporate numbers continue to be mixed with rather more Directors indicating tough times ahead than might be expected given their first half releases and this is making it hard to asses future numbers even on a basic level. If companies can just hold steady at current earning levels yield returns look astounding in comparison to all the flight to quality assets mentioned above and while (as mentioned) there is a certain amount of caution being advised we have not yet got a full bugle call retreat being sounded.

Currency markets are also holding steady and making a small recovery from the sell off of recent days the Cable cross has recovered to 1.5550 after falling under 1.54 on Tuesday/Wednesday.  Sterling has tended to oscillate (in wide swathes) around 1.50/1.55 since the turn of the year and the price now could be considered pretty much a median level.  Clients are very much two way in this market with overall positions turning long or short on a moment’s notice which really emphasises the ‘averageness’ of the current price. The wide band is 1.40 to 1.70 with the middle band at 1.48/1.60 the current price puts us pretty much in the middle of both of these.

The Euro has followed the Pound slightly higher today and we are back above 1.2700 and as with the Pound looking comfortable for the moment. Clients are very much two way here as well as indecision over the European situation continues to swirl through markets.  Strong support is some way away at 1.2350/1.2450 but we are seeing a lack of appetite to drive us below 1.26 at the moment anyway. Bulls will be looking at 1.2900 as the first target.

Oil recovered with a vengeance in a perverse move as inventories turned on a sixpence coming in at up over 4000 having been expected to fall slightly.  Normally this would have sent prices lower (as it did in the immediate aftermath of the release) but this was the low and buyers came in strongly from that moment onwards. The 67/70 buck level has been a support for a very long time now and traders seemed in no mood to try to change things just yet. The same could be said for the upside where 81/83 and 85/86 have proved to be tough to break over the last year or so.  This said we do remain in the bottom bit of the range so we have too outlooks… either this is a great place to buy as the downside risk is less than the upside potential or we are in the process of a major sell off and any bounce is an opportunity to sell. Currently the range remains king (so the buyers below $73 have the upper hand) but if the bond markets are correct oil may have a considerable way lower to go.

Gold is back up at the highs and probing higher as I write.  Open longs have been reported as being nearly 40pc up on last year which gives an indication as to the possible overhang if things go wrong but for the moment the bulls are having it all their own may and it is very difficult to justify opposing the momentum.