FTSE Spreads Struggle as Technical Analysis Remains Bearish
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 22 November 2011
There is finally a positive start to a session this morning after what has seemed like a bit of a rout for equity markets.
The bounce so far though isn’t very convincing as the technical analysis has become increasingly bearish as support level after support level is broken up.
The dizzy heights of 5600 seem a world away from where we are now as any upside looks increasingly challenging with any rallies being very short lived.
Sentiment is seriously bearish now and even meeting a retired ex-banker yesterday, who knew little about spread betting or CFDs, asked me how he could make money from the FTSE going to 4600.
Our spread betting account holders on the other hand are more optimistic at the moment as they have been opposing the weakness buying the FTSE around these levels. In fact, they were even longer of the index yesterday, so a further bounce will be warmly welcomed by them.
Key levels to watch in the near term are 5300 to the upside, which is where the upper downward trend line comes in, and then beyond there, if we ever get to those levels, is resistance at 5350 and 5400.
To the downside, support is seen at yesterday’s low of 5220 and 5200 but if we breach here there’s not much until as low as 5000.
With so much shrouding the financial spread betting markets at the moment investors are finding it tough to get in the slightest bit excited about equities.
With the Americans we’ve seen it all before and, whilst the credit rating agencies have said that they are not currently circling the US, they will be monitoring the politicians’ inability to agree on their budget deficit cuts closely.
The key to all our problems at the moment though is not only to have a lasting solution to the European debt crisis, but to reinvigorate growth.
Yesterday our Dave admitted that his deficit reduction plans were not going to hit their original targets. This was a nice little prompt for the newspapers ahead of next week’s autumn statement from the Chancellor, but the reasons given for the miss were a lack of growth.
The adage of “under promising and over delivering” is not something that politicians seem capable of doing and their original growth forecasts were, at best, over optimistic when the coalition set out their plans.
Lots of hopes are being pinned on next week’s statement as the unemployed and businesses look to George to kick start the economy which has been flat lining for the past few quarters.
FX traders have displayed a reversal in sentiment and we are seeing a squeeze in riskier currencies, on the back of rating companies affirming the US’s credit.
S&P, Moody’s and Fitch each retained their stance even after the US Congress failed to agree on reducing the budget deficit.
Traders have also taken into consideration holidays in Japan tomorrow and Thanksgiving in the US on Thursday, so are possibly unwinding their positions.
The euro is taking the advantage and so the euro - dollar spread betting market is trading at $1.3524, with support at $1.3465 and resistance at $1.3615.
It could possibly have been looking at the bearish technicals, but investors yesterday seemed to realise that a challenge of the $1800.0 level for gold was growing ever more unlikely. This triggered a mass close out of long positions.
After dropping to $1666.1, the precious metal tried to claw back some of the losses, but the bulls were not as powerful as before and could only pull it up to close at $1676.8.
At time of writing though, they seem to be using all their force and have pushed the gold spread betting market to $1695.5.
Extra pressure was provided on crude in the form of a lack of agreement from the US on the budget deficit and coupled with the lingering concerns of the European debt crisis.
Market traders began unwinding their longs and washing out the weaker bulls. Eyes were on the weakening equity markets as well, which added weight to an already heavy energy sector.
At time of writing, not much has changed, with Brent only adding 70 ticks to $107.55.
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 Spreads Struggle as Technical Analysis Remains Bearish' edited by SD, updated 22-Nov-11
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