The regular monthly spread trading review from IG Index.
IG Index FTSE Trading - May 08
"Flat month for FTSE 100"
May started on a bullish footing for the UK stock market with the FTSE 100 Spread Trading continuing to push higher and continue its recovery from March lows, just ahead of the 5400 mark.
By the middle of the month the rally had pushed the market back to levels not seen since early January. A remarkable bounce-back considering the falls we saw at the end of that month. But nothing moves in a straight line forever and the last trading days of May saw steady declines bringing the index back towards the 6000 mark. Leaving the FTSE broadly unchanged.
The 6000 mark is considered by some to be an important level for the FTSE 100. In April there was a real tug of war around here by the buyers and sellers. A battle ultimately won by the bulls. It is an area which is likely to be closely watched in early June to see if it once again proves a pivotal point for market sentiment.
(IG Index price data: compiled 28 May 2008)
IG Index US Markets Spread Trading
"S&P 500 starts to falter"
The make-up of the FTSE 100 means that movements in the index are heavily influenced by oil and mining stocks. With strength in these sectors in recent weeks the index could perhaps be accused of failing to provide a representative view of the wider stock market. A similar argument could be made against the US index, the Dow Jones Industrial Average, aka Wall Street. That leaves the S&P 500 as the index of choice for many US market watchers.
During May, the index traded up towards the 1440 level, a point not seen since the first week of 2008. The second half of May saw some of this momentum fade as, among other factors, the Federal Reserve gave some clear hints that it was finished cutting interest rates for now.
The S&P 500 Spread Betting did manage to notch up another positive performance in May, but ended the month well off its highs. Going into June the 1360/1380 area is likely to be closely watched by chart-based traders as this band provided support for the market on the way up in April and May. It remains to be seen whether investors will once again see value at these levels if further weakness emerges.
(IG Index price data: compiled 28 May 2008)
IG Index Crude Oil Markets
"Another month, another all-time high for crude oil"
The price of oil is seldom out of the news for long and last month was no exception. May saw the multi-year trend for crude oil continue, with the July contract pushing out to $135 a barrel. That’s a 35% gain for this year already and more than double what it was a year ago.
A combination of factors continues to push the oil price higher including continued demand from China, unrest in oil-producing areas of the world such as Nigeria, and a weakening US dollar. There has also recently been a significant proportion of bullish comment from markets analysts, suggesting that even greater gains lie ahead. One commentator expects us to see $200 per barrel before the year is out.
Whether this will happen is anyone's guess at the moment. A contrarian school of thought is that when everyone is expecting the price to go one way, that is precisely the time the market does the opposite! For now, crude oil has proved to be resilient to sell-offs with these historically turning out just to be buying opportunities before the next move higher. Throughout May the $120 level underpinned any weakness and this will be one area of focus if the price of oil should slide.
(IG Index price data: compiled 28 May 2008)
The above comments do not constitute investment advice and neither IG Index nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Financial Spread Trading and CFDs carry a high level of risk to your capital. You may lose more than your initial investment. They may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
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'IG Index Markets May' edited by IG Index, updated 09-Jun-08
Index of UK financial market trading articles - the regular closing market comments from IG Index...see Index.
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Please note that spread betting and CFD trading carry a high level of risk to your capital. You can lose more than your initial deposit. These products may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
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