Urk…
Early morning action in the Dow and S&P is very worrying indeed. As commentated yesterday the S&P has good support at 815, 8808 and 800 to 802. Unfortunately without any help from the Americans (who were on holiday yesterday) the rolling S&P market has managed to slump almost 20 points and is now at 807.0-807.4, lower than the worst point on Thursday.
The FTSE is also looking a tad grim at around 4110 just above major support and the Dax, also perching above a small abyss, at 4315 is similarly right above a significant point. The Dow is still below the major 7850 support at 7680 but remains the only one of the big indices to have broken lower. If the Dax, FTSE and S&P can hold at these levels then the prospects for a bounce may grow stronger but it would be a brave investor to commit too much to a rally at this time.
For all the negative news at this time markets remain within recent times trading ranges and until a definite break out one way or the other is confirmed playing the lows and highs of the current chart patterns.
There is not a great deal of news out today with no major corporate or economic data expected and it would normally be considered as a good day for a long lunch. Unfortunately for the hard pressed restaurants across the City it is unlikely that many will be leaving their dealing screens anytime soon.
Sterling has fallen (yet again) overnight and we are back at the 1.4150 support versus the USD mentioned yesterday and we are seeing some buying from clients at this level. The problem remains that the pound is still in its downward trend cycle and comments from Mr Bean of the BOE (sounds like a film character) that a weak pound will help the recovery give credence to the view that the Government is happy with a weak sterling policy. I would have thought that all the evidence of the illusion concerning weak currency growth, built up over the last 50 or 60 years, might have percolated into the Treasury by now. European partners will not be happy if the UK is seen to be devaluing to their short term disadvantage and the Chancellor or the Governor may be called on to make some reverse comment espousing continued support for a strong pound! Such is politics. It appears that the holiday in Val D’Isere or Tenerife is going to be a great deal more expensive from now on (yet another nail in the coffin of the UK’s trade deficit)
With indices under pressure Gold has made a break for the sun again and we are now at $959, up $17 overnight, and looking good for a push towards the $1000 level once again. A close eye should be kept on the other markets though as and sign of strength in equities might see a drop in appetite for the Yellow Metal. My comment yesterday that increasing cash supply should increase the price of Gold but not the value remains a valid one but for spread betters/traders this is of little interest as, with a cash for difference product, money is still money.
Oil remains stuck in between 43.00 to 50.00 dollars (for Brent) although we are now flirting with the bottom of the range, a week ago we were at the top and the week before at the bottom and the week before at the top etc etc… It is difficult to see any new event taking us lower today and our clients are busily buying the lows at around 43.50. A break below 42.75 might indicate a shift to a new trading area so bulls should be wary of this point.
Click here to go to Capital Spreads
Simon Denham is COO of London Capital Group and Capital Spreads. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.