Spread Trading 1 Sep 09
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Trading 1 Sep 09
The battle over the 4915-4925 FTSE 100 resistance rages unabated this morning after an abortive attempt to the downside yesterday while the UK was out soaking up the sun.
It is very difficult to get a handle on the immediate future moves for the index as we have now ground to a halt over the last week or so. Those who have missed out on the whole rally (probably the majority) are still waiting for that ‘pull back’ which will allow them a reasonable entry point. Those who have bought into the move are similarly waiting to see if the momentum can be maintained or if the future is indeed slightly dark.
The fact is that the longs see no need to take profits just yet as the yields on their purchases are very nice thank you very much and anyway, even if they did sell, what would they then do with the funds? Cash yields are grim and bonds are still gripped by the fear of over supply in the public sector driving down prices over the next few years.
Perhaps it is better to stick with stock for the medium term especially as many are sitting on sizeable paper profits to soak up any down turn.
The first week in September is generally a quiet one for corporate news as we have finished most of the half term numbers and are not yet into the trading updates for the third quarter. This week is no different.
Hays will be reporting a trading update on Thursday but the poor news release last month was taken well by the market as the fierce cost cutting (head count reduction) was seen a demonstration of a management team on top of its market.
The company remained profitable through what was seen as a terrible time for recruitment. If you read most of the employment headlines over the last 18 months, it seems quite surprising that they had any income at all.
Of course a sizeable slug of revenue comes from temporary/contract staff placement. However it seems that most companies have been very slow to let people go, no matter what the headline unemployment numbers are. Trained, high quality staff are not those you want to trim anyway.
Employment numbers can be deceptive and, although we have been beating our breasts over the woes on the job front over 90% of graduates from last year are now in work. It seems that the top level, those who Hays cater for, is still reasonably vibrant.
This morning sees the FTSE struggling once more to stay above 4900 and our spread betting clients are, once again, selling everything above this mark.
4915-4925 seems to be strong resistance and, although we breached the level briefly on Friday, any approach to these prices is bringing out the bears.
It must also be said that position takers are getting very short term and we are seeing heavy buying as soon as prices get below 4850 as well.
The recent tight trading ranges over the past fortnight or so have persuaded many that we might be entering a period similar to May/June where the FTSE oscillated frequently between quite definite levels.
In the currency markets, the pound has regained a bit of sang-froid after testing the sub $1.62 level once more yesterday. As commented several times recently the $1.62 to $1.66 range has been quite dominant since the end of May.
While there have been a couple of attempts to the downside, petering out at around $1.60, and one to the upside, failing at $1.70, it must be noted that for the moment, the support and resistance levels remain, overall, intact.
At $1.6234-$1.6237 we are just about neutral for the moment and clients are both buyers and sellers in equal proportions.
The Sterling Euro cross is also attracting a good deal of interest with many punters feeling that the recent falls from the £1.17 level to the current £1.1380 price has been overdone.
While there is some volume support from £1.1220 to £1.1400 which might back up this view and the upward trend line from the lows last December currently coming through at £1.1280 (ish), the speed of the weakness since the 18 August does make for some concern.
Inflation in the UK seems a long way away and the current administration is now ‘floating’ some nasty future policies. This means that sterling’s historic interest rate crutch is likely to be absent for rather longer than many have forecast.
The recent rally of the last four/five months may wither as investors find reasons to hold other currencies.
As the hurricane seasons continues to kick the price of oil around we slipped over $3 yesterday as the latest ‘blow’ fizzled out.
The markets continue to look for the next hurricane Katrina, stupid really, as the point about that storm was that it was a once in a lifetime event. Each forecast drives prices higher only to see them fall back later in the day.
It cannot be far from traders minds to start opposing storm induced price moves as their impact becomes ever weaker.
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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'Spread Trading 1 Sep 09' edited by SD, updated 01-Sep-09
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