Risky assets are just taking a rain check this morning and the failure once again by the FTSE to meaningfully take out its 2011 highs is a concern for the bulls.
Our financial spread betting clients have been right to short the FTSE around the 6100-6080 area as this morning’s weakness brings us down to around 6030.
The FTSE continues to struggle around 6100/30 and looks dangerously to have formed a double or even triple top around the level, having attempted to break above in January, then February and again in May.
May is historically a funny month for the FTSE as there have been almost just as many negative months as there have been positive months over the past twenty seven years. The declines just have it too being slightly greater on average than the rises.
The old adage “sell in May, go away” is doing the rounds and is playing out so far this month, but of course it’s early days. Markets don’t go up in straight lines and with so much uncertainty within the market place at the moment whenever we look like heading to fresh higher ground investors get cold feet.
Once again it’s the mining and energy sectors which are to blame for the sell off as China has released some soft manufacturing data.
Yesterday’s worse than expected PMI numbers for manufactures was also unwelcome and today we get the release of PMI construction data which is also expected to drift lower.
At the same time UK money supply is released along with mortgage approvals. We’ve already seen Nationwide show that house prices fell in April, which was not expected and goes further to indicate that anything outside central London is stagnating or falling in price.
Forex markets initiated a bit of a safe haven move yesterday given the Dollar a bit of a boost, but this was short lived as the US currency reversed its gains.
The failure of the Dollar index to get back above resistance at 73.500 is another signal of weakness and it looks like the never ending weakness might be set to continue.
This morning it is hovering above its lows at 73.180 after a bounce overnight and bears are mounting the pressure in order to test the 73.000 level again. A break below here will open up fresh lows to 72.500 over the short term.
The Dollars turn around mean the likes of EUR/USD recouped earlier losses and headed back towards its recent highs. It’s around $1.4850 this morning so key levels to watch are $1.4920 and then the big figure at $1.5000 to the upside. Downside support is seen at the little double bottom on the hourly chart around $1.4765 and then previous resistance at $1.4710/00.
Cable couldn’t manage the sort of recovery that the Euro managed against the Dollar and Sterling suffered as a result against the single currency.
GBP/EUR broke out to the downside beyond support at €1.1200 following yesterday’s poor PMI manufacturing data. This morning Sterling continues to remain out of favour with GBP/EUR at €1.1120.
The bears have €1.1000 firmly in their sights which at least for the bulls might provide a little support as it has served as a level that attracted buyers in the past. A break below here however will see bears calling for parity with the single currency.
Gold went sideways as investors couldn’t make up their mind as to whether the equity markets were set to sell off or carry on higher. This morning the precious metal is at $1537 and key levels are $1552/58 and $1567 to the upside with $1525/18 and then $1505/00 to the downside.
The crude oil spread betting markets took a tumble late on with Brent falling from $124 down to $122 where it sits just above this morning. $121 and then $119.75 are important near term support levels with $123.20, $124 and $125.35 seen as resistance.
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'Spread Trading 4 May 11' edited by SD, updated 04-May-11
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