Markets have been quiet in the past but this morning is almost something different.
In two hours of trading the FTSE 100 has managed to excite absolutely nobody at all after the Dow Jones and S&P 500 went into deep freeze yesterday evening.
With volumes draining away as dealers head off to the beach there is a good chance that the current moribund conditions will continue for quite some time.
Watching the charts is rather a frustrating pastime as even small moves look huge due to lack of any major scale with which to compare.
The major UK index has now been stuck in a 100 point range for seven sessions and (in truth) today does not exactly look like changing matters.
New Sterling Dollar Range
One ray of hope (for some interest) is that the Pound has gone for broke this morning and busted straight out of the recent trading ranges.
The 07.00 to 09.00 (UK time) trading period is becoming quite interesting as Europeans turn on their screens and hammer the market one way or the other.
The high this morning at $1.6742 has been opposed quite strongly since it was hit at 07.21 this morning and we have slipped back to $1.6650ish with punters getting heavily short all the way up.
Those who have dealt with sufficient margin to avoid being stopped out on the way up may be hoping for a nice price correction back into the $1.6200 to $1.6550 trading range but if we do not get back down there today the chances of a new range being set up are quite strong.
Barclays continues to attract investors and the stock is back up to 289p having failed to challenge the support at 255p a few days ago. There have been many comments in support of Lloyds/HBOS over recent days but it must be noted that Barclays is in an infinitely better position than the UK fixated behemoth.
The Lloyds group still has an enormous small to medium sized corporate loan book and this is unlikely to start improving for many, many months to come.
Financial Spread clients continue to pile into single equities (banks included) and are heavily long of virtually everything.
If inflation does not raise its head and therefore the prospect of interest rates being down here for some years to come then the temptation to search out return via the equity markets is very strong indeed.
However but it must be recognised that the capital value of much of the corporate assets of the FTSE 100 components is also under pressure. While the bear or bull arguments are quite well known and well balanced the betting seems to be heavily in favour of a move to the upside.
Dealers made a killing yesterday on the move higher in the indices, gold, oil etc etc as the early weakness failed to make any headway at all.
Punters have been quick to take profits though and for the most part (except for sterling where sellers are in evidence) have flattened books to see which way the wind blows this time.
Oil moved higher once again to the top of the trading range, just south of $72.
We have been here three times already in the last month, all to no avail. While I am not an oil bear I see no reason for this move higher to prove any more successful than the previous three.
Spread betting punters feel the same way with heavy selling on the off this morning when we were above $72.50.
The current price is around $71.75 after an initial pull back but we may see another attempt to break higher today as the US opens. If we fail to make headway there may be a sell off in the evening session as profit taking comes to the fore.
As with all the markets we need to see reasonable momentum to break out of the ranges, any weakening of resolve and “back we go” into the trading ranges.
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.
The congested trading ranges continue to dominate proceedings with the Markets loath to make a decision about direction.
Punters who are patient and not too aggressive have been able to pick the trades quite simply in virtually all the major arenas especially in such favourites as Cable, FTSE, Oil and the Dow. The ranges have almost become set in stone for all of these markets and the only problem is to avoid being the wrong way round when the break out finally arrives.
On this issue the inability of the FTSE 100 to recover from the 4200 level is becoming a concern as other indices do seem to have bounced from the lows of last midweek.
Financial Spread Clients continue to buy the weakness as this has proved to be the correct decision for some considerable time but it must be noted that this continued failure to move away from the support at 4200 is worrying.
While the major economic forums are uncharacteristically optimistic at the moment for future growth (2010/2011) this still seems to be more of a line in hope rather than expectation. The huge levels of debt created in the consumer portion of the global economy are not going to disappear overnight and this commentator fears that we will have one two hiccups on the way.
Buyers have been much in evidence in the first few minutes of action this morning as the FTSE, which was called down at around 4225 in pre-market activity, was swiftly bought up to the 4250 mark. Short term there is a small resistance level at 4255 which might prove awkward to break through but, for today, the sun is shining and there appears to be little reason for any dramatic activity.
There is a whole swathe of minor economic data from the Treasury this morning which might attract a bit of interest (mortgage lending and approvals, consumer credit, M4 lending).
However, the macro economic position of the UK remains grim no matter how we buff up the data.
Cable this morning seems to be moving towards the highs of its range after looking briefly for a move lower in early action.
$1.6550 is still a good resistance level although we did spend a few hours last Wednesday probing the 50 pips above here. The current GBP/USD spread is $1.6540-$1.6543 (having hit $1.6430 earlier) and we are seeing sellers sharpen their knives once again.
The $1.6200 to $1.6550 range is becoming a little boring now so we might hope for some attempt at a break out but I would hardly hold my breath.
The weight of money opposing every move is becoming increasingly successful as (so far) there has been no significant trial of weak longs or shorts. A move above $1.6600 may be interesting but for bulls it is probably not worth getting involved until this resistance has gone (or the market goes back below $1.6300 again).
The bears seem confident that this morning’s move will fail again as we are seeing heavy selling as we approach $1.6550.
The moves so far this morning are almost solely Sterling based with the Dollar, Yen and Euro all quite moribund.
There seems to be a sense of trying to find the weakest currency rather than looking for the ‘strongest’ as the news from across the globe continues to be poor.
For all of the ‘talking up’ from the OECD the Swiss Central Bank intervened last week selling the Swiss Franc at the $1.0650 level.
The Franc is (like gold) a safe haven instrument and the return to the highs for the currency would indicate that a lot of money is unhappy with current conditions.
The immediate move of almost 350 pips on the news of the selling showed that the SCB still has significant power but we are well off those immediate highs (at $1.1015) and the general drift into the Franc seems to be still in place.
Lloyds has become a conviction buy for Goldman Sachs this morning which has had an immediate positive effect but the selling pressure on the open, up at 70p, was almost instant. This reflects, one supposes, the waning impact of Goldman’s on investor opinion.
Lloyds has the biggest share of the domestic economy of any single bank in the G7 and GS reckon that this will pay dividends in the future. It may well do so but investor fear remains in place over the near 45% holding of the State.
There is also the fact that a huge stake in the domestic economy is wonderful so long as you are around to enjoy it. If the domestic economy turns south again Lloyds’ pre-eminent position will be a millstone rather than boon.
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.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It 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.
Article provided / approved by Financial Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Online Spread Trading' edited by Simon Denham, updated 30-Jun-09
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