FTSE Spread Trading Market Lags Behind Strong European Indices
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 18 January 2012
Markets continue to remain strong in the face of mounting concerns over the European debt crisis.
The FTSE is up some 2% so far this year and any dips seem to be met with decent support and buying that takes us back towards the highs.
Yesterday saw the index fail once again at the 5720 level which is a cause of concern for the bulls but European indices look strong, forging ahead to new highs as opposed to struggling at their resistance levels.
With the German DAX and French CAC leading the way it could only be a matter of time before the FTSE gets trough this near term resistance barrier and tests the highs from October last year around 5770.
The DAX in particular yesterday was in flying form following the ZEW survey, which was still negative but jumped the most since records began.
This was what supported the German index yesterday, edging it ever closer to test its 200 day moving average on the daily chart, and this morning the index is expected to commence just in the black.
The FTSE meanwhile has remained above its 200 day moving average for the whole year so far and it would seem that it is simply allowing its European counterparts to catch up with it.
This morning the FTSE was expected to commence fairly flatish but once we got underway we were indeed in the red at around 5770.
Financial Spreads' clients remain bearish with overall short positions on the FTSE expecting the near term resistance to stand firm and the index to become over powered by the European situation again.
Today sees focus on Greece, what a surprise, as discussions get underway there again with the IMF, ECB and EU visiting Athens to thrash out a deal with bond holders.
People who bought Greek debt are going to have to take some sort of further hit as Greece is simply in no position to pay them back and the troika doesn't want to through any more money at lost cause.
The reality is finally dawning that Greece is most likely to default on its debts come mid to late March, so why isn't the market plunging?
Spread trading investors seem to have come to terms with this eventuality and expect an orderly exit for the country. At the same time they are betting on a containment of the crisis and that, as long as Germany remains, if it doesn't spread to other peripheral countries, the project might just survive.
On the economic data front the focus for the UK this morning is unemployment data which is unsurprisingly expected to see the claimant count rise once again.
The last couple of months have actually been better than expected even if the number of claims has continued to rise and October's number was even revised downwards.
Unfortunately this is not anything to be proud of as the overall unemployment rate remains at 8.3% and is only expected to get higher throughout this year.
Later in the day there's US producer price data and industrial production figures due out.
The euro attempted a recovery to get EUR/USD back above $1.2800 but it couldn't quite get back above there. Only this morning it made another attempt, only to fail once again, taking the single currency back towards $1.2780 at the time of writing.
Technical analysis of the hourly chart highlights a double top formation and this shows how difficult it is for the euro to make any traction at the moment as it truly remains the unloved currency of the forex markets.
The trend remains firmly in a negative stance and near term support and resistance is seen at $1.2700/2680/2645 and $1.2805/2840 respectively.
Gold dipped yesterday as the bulls seem to have lost momentum briefly. With the precious metal at $1652 this morning the recent high around $1665 remains the next hurdle of the bulls.
On the downside they'll be hoping that the near term support at $1640 and $1630 will hold out.
Metal prices have had a good start to the year in general, similar to equity markets, and for that to continue they will rely on a continuation of the build in risk appetite.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'FTSE Spread Trading Market Lags Behind Strong European Indices' edited by SD, updated 18-Jan-12
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