Daily Market News: 16-Feb-2010
Finally we have broken out of the constricted ranges of recent sessions as the markets decide this morning that the future is not as grim as many might be forecasting. The FTSE has risen above the 5180/5200 resistance range and is powering ahead towards the middle 5200’s as I write. This represents its highest price for several weeks but, more importantly, seems to have moved us away from the bearish phase that has been dominating since the first week in January.
The trigger for the move seems to have been better than expected numbers out of Barclays who have once again defied expectations with substantially better than forecast results this coupled with the EU attempting to play hardball with Greece (and by association Spain, Portugal and Italy as well) has given a much needed boost to investor morale. Whether all this will survive the anticipated global spending squeeze is unknown, of course, but for the moment the bulls in virtually every asset class are enjoying their day in the sun.
The FTSE is at it highs for several weeks at 5230 having finally breached 5200 in very early action. There is some minor resistance at 5250 but for the bulls the target seems to be 5275/80 and then 5360. For pressurised bears the hope will be for a swift return below 5200 in the very short term at least.
The US markets have also moved higher with the S&P breaching 1082 which had proved something of a block and is now trading at 1089. The obvious near term target is 1100 but we may find that 1105 is the more crucial point if the rally is sustained. The market has tended to shoot through the 1090’s on it way somewhere else over the last four or five months with supports and resistances tending to be at, or just above, 1100 or at, or just below, 1085. Very few moves have petered out in the 1090’s.
On the currency front the activity is somewhat less interesting but for the Euro there is at least some reprieve as the sub 1.36 level has been rejected once again. The markets have tended to rally on dollar weakness over the last month or so and vice versa so it is not surprising to see the Euro move higher on the break out for equities and Gold. The move higher though is still quite restrained just getting us to 1.3675 as I write and the fear for dealers must be that new revelations of the sums required for the Southern States or of the understandable intransigence of the Northerners may deal another blow to sentiment for the currency.
Resistance for the Euro is at 1.3690/1.3710 just above the current level. A breach through here may give hopes for further strength to the 1.38 level. Failure through today’s session to make any further headway may be taken negatively and traders will be eying the market for possibilities of a late sell off if we are still at the current levels later in the day.
Gold (as mentioned) seems to have finally decided that the sell off has done enough. Yesterday saw strong price gains and as mentioned in yesterday’s comment the breach of the 1098/1104 resistance saw a sharp move higher in the early hours this morning. We are now at 1115 and looking reasonably comfortable for the time being. For the bears in all the markets the hope must be that the moves of today and yesterday are of the dead cat bounce variety but it must be mentioned that the extreme pessimism of last week failed to result in any further pressure to the downside in the equity indices, the commodity market or the bond markets. The lack of any follow through on the Jan/Feb falls is encouraging the buyers and it would be foolish to stand in the way just at the moment. Gold will be eying the last bull move peak in the mid 1120’s and then (ever hopeful) the resistance that foiled any rallies in January between 1145 and 1160.
Oil is following the other markets but is still under the talismanic 75 buck level at 74.85 having peaked at 75.25 early on. In truth it is difficult to be too bearish of the black stuff as one has to imagine that demand is straining the supply capacity but… we have been saying this for months/years and we are still bashing around the 60 to 80 dollar level (albeit having hit 147 and 34 in the last couple of years). Supply capacity seems to be increasing as well as problem areas start to come back on line (Nigeria and Iraq) and over and above everything is the ‘oil sands’ issue of massive deposits which become economic above about $55-60 a barrel. While the peak oil argument is very valid oil is a consumer item price based on current availability. Unlike Gold, it is very expensive to store for some future date when the black stuff will undeniably be scarce. So until such time as demand actually does overpower possible supply talk of 100 then 200 bucks a barrel is likely to be frustrated.
Daily Commentary by Simon Denham, MD, Capital Spreads. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.