And so we stagger lower without any real emphasis on a return to a bear market.

The FTSE is now trading below 4200 on this mornings open at around 4170 but there does not appear to be any sense of rising panic amongst investors, on the contrary our clients are continuing to buy any weakness in anticipation of a potential rebound from the current fragility.

As mentioned in previous comments clients seem to be interested in the individual component parts of the FTSE whilst at the same time being ambivalent over the actual overall index itself. Clients are net long to the tune of ten to one longs over shorts. The median level for the period from 2004 to date is around six to one this indicates quite a heavy predisposition to the long side.

With investors seeming to be rather less worried than the markets would indicate it must be mentioned that the likelihood at this moment for a dramatic sell off seems lower than might be expected. There is a reasonable chance of a move into the 4000’s but this is only 100 pips below current levels and, in reality, only matches the probability of renewed strength to push us back above 4200 and 4300. The big investors are still seeming to be sanguine about the current situation and the major portfolio selloffs of last year, and earlier this, do not appear to have a strong prospect for a repeat appearance.

This said the performance yesterday was disappointing after the FTSE regained the 4240 level in the morning European session only to be sold off during the afternoon US trading period. The Dow and S&P, having reversed the Euro sell off of Monday morning, spent the entire day on the back foot with only one, weak, attempt to rebound during the whole session. The bright spot for the FTSE is that the size of the fall in the US has not been reflected in the UK index with the low prints of both Monday, Tuesday and this morning showing solid buying at around 4160. The S&P is still struggling to regain the Monday levels and there does appear to be some resistance at 886 to a move higher. Clients are looking to sell at current levels (884.5) with close stops above (887).

The pound has had a shocker of a start to the week with the yen cross falling 500 pips, cable dropping 250 pips and against the Euro (slightly better) just down a cent. While the moves are not unusual (as sterling has been very volatile for many months) the worry is that we are probing levels below serious support levels. Cable managed an attempt to regain the 1.6200-1.6250 support but the effort proved abortive and dealers seem to be happy to be shorting down here at the 1.6100 level. The charts for the pound are beginning to show signs of tiredness setting in with Cable now well through the short term upward trend line and looking increasingly likely to try an attempt at the medium term support (currently at around 1.5750). Punters are being very flighty over even small currency shifts with the overall book moving from heavily short to heavily long in a variety of currencies at a moments notice. The lesson appears to be to get in and out quickly taking your profits and losses more quickly than usual.
As feared in previous comments Oil continues to weaken and the probability is increasing of a return to the 59.50 (brent) volume and price support level. With the current price at 62.50 there is not much technical support below here but (on the other hand) it must be said that a return to test the resistance just below $66 cannot be ruled out. With Oil inventories due out later today ther might be a bit of fireworks around 15.00

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