What a strange day. Yesterday started with virtually every asset class taking a bit of a battering and ended with the FTSE, Dax, Dow and S&P all pushing towards the recent highs (but none actually threatening them) Sterling reversing the Far East weakness and Oil recovering some stability before tomorrow’s inventories.

Today has already seen an exciting opening 10 minutes (as with yesterday) as the opening call at just above 5175 on the FTSE was immediately sold into and the Futures took a 30 point battering. The first few minutes have a disconcerting similarity to the last session and bulls will be hoping that the outcome is much the same with 50-60 point rally to the close. At the moment 5175-5180 looks to be good resistance and 5130 to 5140 looks like support. The obvious major barrier is the high at close to 5200 recorded on the 18th September and we might need a bit more good news to get above this.

The Dax seems to be building a particularly impressive high resistance with five of the last eight sessions all failing in the same 10 point range of 5750-5760. Any attempt above here may well cause another sharp move higher but obviously a continued failure to break higher may cause some fatigue to enter the equation. Yesterday’s complete rejection of the sell off down to 5550 and the 200 point move up to 5750 would seem to indicate that the bull run still has some legs but the failure to actually go that extra yard above 5760 will be worrying.

Cable had a good attempt last night and early this morning to make a break above 1.5900 reaching 1.5960 in the small hours before selling has once again taken the upper hand. As I write we are now down at 1.5865 and, to be honest, looking a tad on the soft side. As mentioned in yesterday’s comment 1.5770 is a historic support level with 1.5750-1.5790 being the range that will have to be breached. As we commented too many people seemed to be short yesterday afternoon for a continuation of the move and the currency oscillated between the mid to low 1.58’s and 1.59 through the whole session. The lack of any particularly supportive comment from the BOE tells its own story (as is the case for the Fed with the dollar) and in this scenario it might be comments from other central banks that will come to the pounds aid. Are we going to see some kind of competitive currency devaluation from the central banks? Japan, China and Euroland cannot exactly be ecstatic about the competitive barrier to trade being erected by the continual appreciation of their domestic currency.

Short sellers of the Pound and Dollar would be advised to watch for either crocodile tears from the BOE or Fed or for some action from the ECB or BOJ to keep a lid on the moves.

It remains difficult for sellers to push oil below the 65 dollar mark and most punters are now long looking for the reaction move to the recent weakness to take us back up towards the 72 level. We have seen sizeable trades with clients continually buying the 67/68’s and selling the 72/73’s as this range trade has worked many times in the last two months. The push towards 65 has left many long and wrong but with no confirmation of a weakening impetus most seem content to hold on a wait to see if the black stuff can regain its allure. The inventories out tomorrow will probably induce some liquidation, as holding onto positions through the toss of a coin is seldom profitable, and analysts are once again calling for weaker numbers which (if they happen) should bolster the price.

Gold seems to have gone to sleep. As mentioned several times the reaction to finally achieving a solid trading period around/above the 1000 mark seems to have had very little impact. In fact the trading range for the last 18 sessions since the 4th of September has been one of the least volatile for several years. The betting still seems to be for higher prices with the current hiatus being described as a pause for breathe before the next move but it must be said that most of the criteria for higher gold are in place already (low rates, weak dollar, economic worries etc etc) and they cannot all remain there for much longer. The credit crunch arrived in Aug/Sep 2007 which triggered the third phase of the big bull move over the last six years. The fear for longs is that the targets of 1200 or 1500 are now just as close as the $650 starting point of the current move.