Spread Trading 6 May 09 - Barclays and Lehmans

Spread Trading 6 May 09

Today's update see » Financial Markets.

Spread Trading 6 May 09

Despite a little move higher in Asia the FTSE is taking a small breather this morning and some profit taking is creeping in. The market is expected to fall sixteen points on the open to 4320 and this after it rejected yesterday’s highs and failed to test 4400.

Resistance is expected around the 4415 level, but in the absence of reaching that level the market may have run out of steam as investors tread cautiously ahead of the tomorrow’s US stress test results.

Recently the market seems to have been taking the bad news in its stride and any good pieces of economic data have helped boost us higher, the hallmarks of a bullish market. Having said that, this morning the FTSE 100 has struggled to take cheer from much better than expected consumer confidence figures.

Despite us still being in the middle of a deep recession and the recovery being a long way off, the risks of us remaining in a depression have abated somewhat and recently little glimmers of hope have appeared.

House prices show signs that their falls are slowing, the stock market has posted a tremendous gain in April and the banks seem to be getting their act together. On top of this the weather has been good to us and the tumble weeds blowing across the high streets seem to have disappeared. It does not come as too much of a surprise that we all feel a little better about the outlook. The Nationwide data rose the most in nearly two years, but still the reluctance of more bulls joining in the party shows great apprehension ahead of tomorrow.

It is hard to see today’s session being one to remember from a volatile point of view, with economic releases being very thin on the ground. Whilst our spread betting clients remain very short the FTSE, having sold into the recent strength, many other investors are most likely going to sit on their hands and wait for the Barclays trading statement tomorrow, then the BOE and ECB interest rate decisions followed by the results of the stress tests before committing anything more to the market.

We have already had some news of the US banks positions filter through to the market. It is clear that there will still need to be some substantial bolstering of balance sheets. Many banks are still facing large write downs and UBS posting a Q1 loss yesterday has given investors a small bite of reality.

Forex markets saw some excitement yesterday with cable breaching the $1.5000 mark in style, pushing onto $1.5100 and beyond. This morning we are back to $1.5040 at the time of writing having hit a low of $1.5000, which is now the near term support having acted as resistance in the past.

A few sellers crept in yesterday and more this morning as clients seem to think that cable looks a little “toppy”. They do not expect the $1.5000 to hold up and in the absence of further strength following the good confidence data overnight, the clients are enjoying this move down from the recent high.

Sterling’s strength against the euro continued yesterday and although we are a little weaker this morning we moved quite aggressively from €1.1200 to €1.1300, mainly as a result of the good manufacturing data yesterday morning.

The trend is in sterling’s favour for the moment and whilst support is expected around €1.1285 and €1.1250, resistance is seen around €1.1350 and then €1.1380.

Today however, the currency markets are likely to be quite quiet with the lack of data out and ahead of the interest rate decisions tomorrow.

Gold once again disappointed bulls yesterday. An attempt at pushing higher only reached $910-$915 before being swiftly rejected. Once again we are hovering around the $900 level. If the precious metal does break through $910-15 then that could open up a test of $950.

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'Spread Trading 6 May 09' edited by SD, updated 06-May-09

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