The summer doldrums have hit with a vengeance as virtually every asset class trades within its recent ranges.  The various pieces of information are not helping either as one bit of good news is closely followed by another item of doubt.

The US reporting season is now almost over and the news has been unequivocally good from the corporate sector and still investors cannot bring themselves to quite believe it. Most analysts had been hoping for good numbers and they got them but the problem for many is that we were hearing about the past not the future.  Companies’ bottom lines and balance sheets have been heavily bolstered by the various massive stimulus packages available across the western world and by the fact that the emerging markets have continued to grow strongly all the while.  We are now putting our hand in the air to call the waiter for the bill and nobody is quite sure how much money all the diners have in their pockets.

The FTSE summed all this up and drifted lower all day (virtually from the opening bell) until closing at its lows for the session.  This morning we are once again on the front foot with buyers looking to come in at the low 5300’s but the extreme bullishness of only a few days ago seems to have somehow evaporated.  5290/5300 remains support and 5340/50 is now resistance (having been support yesterday!).  Our comment of yesterday that what bulls did not want to see was a slip back into the old ranges has come to pass and we will have to fight our way higher again.  Contra traders are once more having a field day as merely opposing any previous ‘major’ session move has proved profitable.

The US markets have similarly stalled but like the FTSE are still within striking distance of new levels.  10590/10600 for the Dow is now looking a very important point with our last two sessions failing at pretty much the same point at 10580.  Clients have been selling at anything above 10550 for quick profits but there is a very high risk of being on the wrong side if there was to be a break out.  Curiously the S&P is rather less positive and, at 1110, the index is some way from the June peak of 1133.  This is rather more worrying than the Dow’s progress as it is built on 500 major company numbers not just the 30 in the Dow which can be heavily swayed by one constituent.  The S&P and Dow seem unable to break away from the psychological levels of 1100 and 10500 respectively and we may find that through the summer these levels continue to exert a fascination.

On the currency markets the Euro continues to battle higher without seeming to make the critical move above 1.3000. We have now been hammering at 1.3035/50 since the middle of July sometimes pulling back down a bit but always returning to the level.  This morning we are up at 1.3030 as I write having already looked a couple of times at 1.3050 without success but the bulls will be hoping that it is just a matter of time.  Standing on the sidelines we can see from the data that the market is still (even after a 10 cent reversal) short of Euros and this is continuing to have an effect on direction.  It is not the Dollar bears who are continually under pressure as they were through the first half of 2010 now the boot is very much on the other foot.  Every move higher in the Euro puts more shorts under water and we have now almost entire reversed the break out Sovereign debt move which started around the beginning of May.

As mentioned the Euro has resistance at 1.30035/50 and above here at 1.3110/20. On the downside support is building at 1.2965/80 and below here at 1.2880/95.  Sterling is similarly bullish versus the dollar and is having its own battle above 1.5600. Clients are selling at all prices above this price and are building up heavy shorts.  An initial move this morning up to 1.5650 has probably proved worrying for these shorts but the attempted break higher ran out of steam in the same fashion as the Euro.  Short position taking is dangerous though as the momentum is definitely bullish at the moment and quick stops are probably recommended above 1.5660.

Gold had one of its quietest days for ages yesterday as traders worried about the possibility of a continuation of Tuesdays falls.  In the event neither a recovery nor a continuation was forthcoming and we ended the day pretty much unchanged.  The Gold bugs seem to be taking some comfort from this in today’s early action and we are back up at 1167 some 10 bucks above the recent lows.  The stability is welcome for the bulls but (as with the bounce last week) we are struggling to regain all the lost ground.  The support at 1154/58 which we mentioned yesterday remains important (and it held which was nice) and on the upside 1174/76 will probably serve as a target point for day trade bulls.

Oil remains bang in the middle of the current 74-80 range. Inventories were far stronger than expected yesterday which may cause some weakness in the front month contract as we approach delivery.  For the time being we continue to oscillate in the range and (frankly) it is difficult to see what is likely to cause a definite sea change.