Spread Trading 18 Aug 10 - Dow Jones Continues to Trade Near 10300

Spread Trading 18 Aug 10

Today's update see » Financial Markets.

Spread Trading 18 Aug 2010

Markets continue to creep higher although they are giving up a little in early action this morning with the FTSE quoted at 5325 having hit 5365 late in the US session.

The FTSE continues to outperform other markets with mining, banking and oil holding steady shrugging off any fears of a slow down. Markets in general seem to be trundling down the path of further Quantative Easing measures, in a variety of forms, from Europe and the US.

‘Old World’ bond and swap markets continue to discount any inflation worries preferring to concentrate on the medium term prospects for the base rate. On the other hand Gold is doing the reverse and seems to be concerned about inflation and the attendant effects of ‘printing money’ creating a bull argument for the Precious metals.

The hunt for some sort of yield is hotting up and there must be concerns that unsustainable valuations in some asset classes, long term sovereign debt for instance, are creating another bubble effect.

As mentioned the FTSE is called at 5325, 25 points off from yesterday’s close but still definitely in the higher half of the recent ranges.

There is precious little information out today with only the Crude Oil inventories to come from the US late this afternoon and so we would expect a quiet session with the likelihood being a minor continuation of current trends.

In general days with no data tend to follow the prevailing wind direction. We made it over the 5305/15 resistance level, and this now turns into support, but could not quite make it through the 5355/65 further barrier. The turn around in the Dow and S&P late in the day has brought us back to the current level.

I seem to have been writing about the Dow spreads being in or around the 10300’s for absolutely ages even though it has only been a week. However, the comment of yesterday still holds good in that the failure to reverse the fall out of last week is beginning to weigh on minds.

We made a spirited attempt to regain 10500 yesterday but late selling, for no discernable reason, has brought us back into the gravity well of the aforementioned 10300 level.

Technically the market is looking solid and Monday’s candlestick formation is generally seen as a bullish indicator it is just the anaemic performance that is beginning to grate. It is almost as though we are just waiting for the next piece of bad news to react to the downside.

The Dow is building a very solid ‘closing’ support level at 10290/10310 having been pinned there for four of the last five sessions.

Currency spread betting markets are still at the lower end of recent trading levels with the Euro recovering from the $1.2720/30 lows but not able to make it over $1.2900.

Sentiment is certainly not Euro friendly, for all of the rally from the pit of June, with most clients continuing to try to short the currency on any upticks and this is also reflected in the Pounds recent sell off from $1.6000.

Cable has, this morning, broken through the bull trend line in place since May although the EUR/USD is still above it having bounced from the line at the aforementioned $1.2720/30 on Monday.

This builds the possibility of, either the Cable break being confirmed with a Euro move lower or the Euro holding steady and dragging the Pound back up.

Gold remains at the top of the trading ranges but failed to make it through the $1225/27 resistance mentioned yesterday.

Today it is drifting lower in light action but there is reasonable support at $1221/23 to be defeated if a more general drift is to be seen.

There are a series of step supports under the current price, $1217.5-1219.5 and $1212/14, before the more solid $1200/04.

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'Spread Trading 18 Aug 10' edited by SD, updated 18-Aug-10

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