The markets remain shrouded in uncertainty and now the rally of the past two previous sessions seems to have a somewhat “dead cat” feel about it.
As the price for insuring against debt defaults across the Eurozone continue to rise nervousness amongst investors is still rife.
This morning risk is off the table and there’s selling across the board. Sentiment isn’t being helped by the Korea situation that still rumbles on in the background with unsettling comments and threats of war from the Northern side.
So whilst the North Americans enjoy their break the Europeans are left trying to solve their problems which get worse by the day as the yields on government bonds continue to rise.
Come Monday however US investors may be full of optimism having been on a spending spree over their extended weekend and today’s falls could be reversed quickly.
The Dow finished its last trading session with a good move higher before breaking for their holidays and they don’t much like being shifted around by European markets when they are closed, so any moves to the downside might be limited.
The FTSE and other European spread betting indices seem today to be just wishing that this week was over and they can hope for better things in the week and month ahead.
Despite the early negative start volumes will remain low and trading ranges narrow. Near term support is around 5624 and 5575 and to the upside resistance is seen at yesterday’s high of 5710 and then 5750.
Things will get back into full swing next week as we head into the final month of 2010. The question on everyone’s lips is will be see the usual strength that we see in equity markets this time round?
Certainly the odds are in favour of such a move as even in the eye of the financial crisis storms back in 2007 and 2008, the markets rallied in December. In fact of the last 26 years the FTSE 100 has only ever declined 4 times in the month of December. It’s undoubtedly the most bullish calendar month of the year.
The Euro continues to find no friends and is weaker again this morning having been sold off quite aggressively right from the start of the European session. It actually hit a low of $1.3246 but is just seeing a little bounce and is at $1.3285 at the time of writing.
As mentioned yesterday the $1.3300 level is a critical support level and now that we’re below it the single currency looks to be in danger of heading on down towards the $1.3025 area over the medium term.
The Dollar is certainly holding onto its own at the moment, when just a month ago it seemed that there was no future whatsoever for the US currency. The Dollar index has recovered some 5.5% but, rather like the recent bounce in equity markets, this small recovery for the Dollar has a bit a dead cat feel about it too.
The overall trend for the Dollar is still very much a downward one and against the Yen it has to get back above the $90 area before we can say things are looking better.
Gold is off a little along with equities and we didn’t bounce off the lower upward channel line. A break below this indicates that this channel may now have broken down but the bulls are trying their hardest to drag the precious metal back.
At $1369 this morning the little move lower earlier could have paved the way for another move towards the $1357 area.
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'Spread Trading 26 Nov 10' edited by SD, updated 26-Nov-10
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