Difficult to know what to say this morning as aside frm the Barclays news there appears to be little to go on. Trading is actually quite quiet as investors/dealers attempt to take in all the varying pieces of news which have hit the screens in the last week or so.
There is a certain argument that has it that we have stopped falling on bad news which is one of the signs that the bear market may be drawing to a close but on the other hand there has been quite a bit of ‘good news’ since last Monday’s big rally and this does not seem to be pushing us up either. In this scenario we are possibly looking at continued bumbling along in a tight range for a considerable period of time which would be great for the day trader mentality of many speculative players. An environment where loss making positions could be held until they move into profit would boost confidence for the longer term punters (sorry that should say “investment managers”).
The FTSE is still constrained by the 4000 level, even though we had an attempt on it late on Monday and between 4000 and 4050 is also quite a bit of legacy volume resistance and failed moves (both higher and lower). Not only this but also the medium term (one year) downward trendline is currently at 4015. These factors make for a sizeable resistance to any move higher but also act as an irresistible magnet for those desiring confirmation of the end of the bear market.
The best bet at the moment might be that, with the drip drip of slightly better news filtering through, there will be further moves to the upside at least to make an attempt even if the attempt fails.
On the corporate side the news from Barclays (and if we remember from Citibank a couple of weeks ago as well) continues to be good and, whilst they are not out of the woods by any means just yet, this is still something on the positive side. As the banks were the first to show through at the start of this downturn it would be neatly symmetrical if they were the first to show us the way out. We were drawing the attention of readers to the ridiculous sell off in Barclays just a couple of weeks ago it is gratifying to see that the price has more than doubled since then. It is just a pity that I did not buy them myself! The esteemed analysts who recommended selling them when they were at 80p (and lower!) on the basis of rumour rather than fact (thus causing the sharp sell off on the 5th of this month) have a bit to answer for to their investors.
Currency markets are still wary of the recent indication that the US might not be opposed to the creation of a ‘Super Currency’ run by the IMF, the mere mention of which sent the dollar into momentary freefall on Wednesday. Some of the strength of the dollar is often attributed to the fact that it is the ‘global currency’ and is certainly the reserve currency of choice for governments across the planet. If there was even a hint that this state of affairs was about to end the effect could be catastrophic on dollar holdings. The idea was mooted by the Chinese and was not immediately kicked into touch by everyone else. The fact that nobody actually said “you must be joking” added weight to the possibility. But I feel that this is more of an indication that nobody wants to p**s off the Chinese rather than any real agreement on the matter. The Chinese are the biggest holders of external debt and everyone wants them to keep on buying.
I believe that the weakness in the dollar recently versus the Euro may start to reverse especially if 1.3410 is breached to the downside. With markets at 1.3540 at the moment there is quite a way to go to ‘ have a pop’ but each day for the last six trading sessions as printed a lower high as buyers run out of steam at ever lower prices might be significant.
The recent economic figures from the US have been significantly better than expected and although the huge issuance from the Treasury over the next few years is likely to prompt the Fed to retain micro low rates the good news may tempt some movement to recover much of the ground lost by the greenback.
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