What a disaster. Yesterday’s reversal in virtually every market of the Monday/Tuesday rally turned Thursday 4th Feb into our clients worst ever day in the history of the company … rather ruining Monday which had been the best!

Unfortunately this time round there does not seem to be surge of buying waiting in the wings to take us all the way back up again. We have become so used to small daily trading ranges of 50 points (in the FTSE) with the odd 100 pointer to add a bit of spice that the actions of the markets since the middle of January have rather caught out the unwary. Unfortunately for the longs yesterday the expectation that the sell off of last week would follow all the other sell-offs of  the last year or so with a swift rebound into the good not fulfilled and continued buying through out the session in Indices, Currencies, Gold, Oil and Equities told its own sorry tale.

Fortunately I was out of the office and unable to damage my own bank account by one solitary penny.

The dark clouds seem to be gathering once again with various economic data and corporate releases across the globe not coming in quite as wonderfully as expected.

This morning sees no relenting in early action with the FTSE pressuring 5100 at the off and the Dax ‘having a look at’ 5500 as well. The Dow did at least manage to hold off from breaking the psychological 10,000 level hitting a low of 10,001 (!) in yesterday’s session but we have not exactly roared away either and are now sitting uncomfortably at 10,0010-10,013 in early European activity. We can expect a battle royal over this level and I cannot see the Americans giving up on it that easily.

For the FTSE we are now in new territory with not much in the way of support at these levels. There is a minor point at 5085 and 5060 which might (?) bear watching but with the current situation of the sellers being in control traders will be nervous of putting too much faith in these. Over and above everything for technical analysts is the worry that we will indeed see a repeat of the Great Crash. Where after the initial crash the markets all appeared to consolidate and indeed had a solid rally only for the second (and more devastating) wave of selling to overwhelm the markets. This having been said it must be emphasised that the general economic news while not exactly storming is certainly not grim in the extreme and it is difficult to see where a really bad downturn is going to come from.

Currency markets have moved hand in hand with the equities with the flight to the Dollar proving that there is life in the old dog yet. The Euro is now looking very sick indeed and is falling as I write trading at 1.3655. There is some solid support just below here at 1.3645 and our clients seem to be seeing this as (another) level to try to get long. As you can see from my use of the word ‘another’ there have been a series of abortive buy levels that traders have pinned their hopes on only to see them crumble in the face of continued selling. The same can be said for the Cable cross which has now breached the lows of last October and is threatening to undo the whole rally of May.

Support for Sterling is at 1.5650 but it is certainly worrying that the solid support around 1.5725 was defeated quite so easily this morning.

Yen is surprisingly also strong as the storm clouds also appear to be gathering over the land of the rising sun once again. Euro Yen cross has been suffering in line with the Euro/Dollar and there are fears here as well that the lows of 2008/9 may be targeted by the more aggressive sellers. The low 122’s does appear to have solid support for the cross though and our clients have been setting up buy orders down at this point.

Gold (which readers of this comment will know I have been wary of for the last few months) was the big loser yesterday and this continues today. The major support target of the bears at $1029 is a good deal closer today that it was on Wednesday. Lows this morning have already hit 1050 and while we must expect a small bounce at any time we must now be threatening those huge hedge fund positions built up in Q3/Q4 2009. If these are forced into liquidation the sell off yesterday might turn out to be a picnic (or maybe this was even one such event anyway).

Trading will continue fast and furious for a few sessions at least and with the Non Farm Payroll likely to add its own bit of chaos to the mix the omens look good for the ‘in and quickly out’ merchants.