Spread Trading 18 Nov 09 - Asian Indices Recover to Boost the FTSE 100

Spread Trading 18 Nov 09

Today's update see » Financial Markets.

Spread Trading 18 Nov 09

This morning the market remains undecided as to whether Monday’s move higher was a legitimate breach of resistance on renewed buyer volume or simply a bear squeeze.

As mentioned already this week there has been a build up of sellers below the 5300 level and so many of their buy stop orders could have contributed largely to the move higher on Monday, so after yesterday’s small decline we now find ourselves in a state of flux pondering what the next move should be.

A small recovery from the lows by Asian indices overnight meant our FTSE quote recovered from overnight loses as we were calling the market to open lower at around 3am this morning.

However, at the time of writing we are some 15 points on the side of the angels and looking like we may have a go at the very near term resistance on 5370 which will have to be overcome before we can have another test of 5400.

Clients opposed last night’s move higher in the Dow and are overall bearish and at the moment which looks like the right call as the US futures have retreated from their highs and we are currently calling the Dow to open 20 points lower at 10418.

The bulls shrugged off weaker than expected industrial production and perhaps were happy to see producer prices come in lower than expected showing that there is probably still plenty of room to keep interest rates in the US low for an “extended period” as the FOMC continues to reiterate.

On the economic data front today we get the release of the Bank of England minutes this morning and then US CPI data at lunchtime. Consumer inflation in the US is still expected to show negative year on year with the monthly number due to show a meagre increase of 0.2%.

A weaker figure could possibly put more pressure on the US Dollar, so the bulls will be hoping to see inflation tick up somewhat, but with the Obama visit to China not seeing any indication that the Chinese will revalue their currency higher, inflation in the US is unlikely to spike any time soon.

On the face of it, the US President’s visit to the rapidly emerging Asian superpower has been a bit of a flop. The China currency issue will no doubt rage for the foreseeable future as they are reluctant to increase the Renminbi and thus reduce the value of their US Dollar assets and, at the same time, make their exports to the vastly consuming US giant more expensive.

On the currency market front the Dollar remains under pressure this morning and it has given up some of the gains it recovered yesterday. Dollar/Yen continues to flirt with the double bottom formed around the ¥87.00 to ¥88.00 mark with the rate currently sitting at ¥89.15.

For Euro/Dollar, whilst still above the 50 day moving average on the daily chart which has provided it with continual support the rate finds the resistance around $1.5000 all too much at the moment and fails to sustain the levels. For now it is just over the $1.4900 mark.

Gold maintained its strength yesterday despite the US Dollar making a bit of ground and again this morning we continue to rise into unchartered territory.

Gold is the only asset continuing to break to new highs and for the time being, when there’s nowhere else to put your money, gold is the market that’s attracting all the buying.

Oil is also better off this morning but lagging the other markets when in the past it has been the leader. Gold seems to have taken its place on that front.

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'Spread Trading 18 Nov 09' edited by SD, updated 18-Nov-09

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