Poor data stalls the bulls.

Discussion in 'Market Commentary' started by SimonDenham, Jun 1, 2016.

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  1. SimonDenham

    SimonDenham Simon Denham CEO Mercor Index Staff Member

    Markets appear to have run out of steam a bit with the higher regions being (possibly) rejected once more. Investors obviously need something more to get involved at the higher levels and they are just not getting it right now.

    Yesterday’s US data was particularly disappointing with virtually every number confirming the reversal in fortunes that we had seen towards the end of last week which had already rather dented the build up from the previous couple of weeks. If the Fed is going to raise rates it wil now be doing so in the face of some sinking indicators.

    Chinese manufacturing data also pointed to weak growth which has dented the commodities index and therefore impacted equity markets across the globe. The Chinese Yuan, once the currency that we all wanted to own, is now near to five year lows as the authorities manage its orderly decline in the same manner as they used to orchestrate its rise.

    Suddenly the world looks a little greyer once again and the prospect for growth/inflation induced rate hikes seems ever further off. As we have commented many times over the last year the simple fact is that the world economy is just bumbling along on a flat line trajectory with no consistent indications of increases in GDP numbers and none particularly showing that they are likely to enter negative territory. The problem with this scenario is that it will do little to help job growth and little to help GDP/debt ratios.

    Economic Data

    As mentioned yesterday’s data was weak and most markets reacted in line with the US dow giving up on the 17800/17900 level. This said the falls have been muted on the back of the numbers which may give the bulls a bit of confidence for the longer term.

    House prices in the UK are slowly subsiding towards inflation parity as the combination of unaffordability and new tax structures take their toll.

    This morning we will also get some PMI numbers out of France and Germany which might be more influential than usual as traders scramble around for clues. Then at 09.30 we will see the UK consumer Credit number and the new Mortgage approvals which are both expected to be sharply down from March. Mortgage lending was particularly high in March as borrowers tried to beat the stamp duty increases.

    US data this afternoon is on the light side as well with just the Manufacturing PMI and the ISM Prices Paid numbers likely to interest. Both numbers are expected to be on the side of the angels (just) which would normally be just how the market likes it… not strong enough for fed intervention .. not weak enough for fears of a slowdown.

    Indices

    FTSE

    As we commented last time the effort exerted by the FTSE in finally pushing above 6200 roughly) seemed to exhaust us and now that other indices have also rather slowed up the sellers have come out once again. We are back at 6210 as I write and frankly looking pretty much stuck here. There has been a big spike down to 6180 already this morning (on the open of the market) but this has, seemingly, been rejected. This said the fact that we were able to sell off in the first place is concerning.

    There are good reasons to buy but also considerable fears on being too positive.

    Support is at 6175/85, 6045/50 then 5980/90

    Resistance is at 6295/00 then 6410/30

    DAX

    The Dax is being particularly volatile this morning with sudden 20/30 point drops and rallies being the order of the day so far. Early weakness seems to have been overcome (for now) and day traders have presumably been jobbing in and out on the moves.

    The sell off in the US markets yesterday found virtually zero foothold with the Dax (obviously a bit but one was left with the feeling that the European markets heart was not in it). Bulls will be hoping that this is an indication of the future but (as mentioned)

    Support is at 10170/80, 10120/30, 10090/00 and 9880/90

    Resistance is at 10280/90 then 10350/60 and 10410/20

    Dow

    US markets reacted to the weaker numbers rather aggressively yesterday afternoon with heavy selling from the opening bell right up to the last hour of the session.

    Whether this was a change in sentiment or just a shake out of weak speculative longs is hard to quantify but the rejection this morning of yesterday’s lows may be a hopeful signal for the longs. As mentioned before since the end of March the Dow seem magnetically attracted to the 17800 level and so far any bulls or bears looking to take us away from here have come to a sticky end.


    Support is at 17710/20, 17605/15, 17450/60 and 17330/40 then 17180/90

    Resistance is at 17870/80, 17915/25 and 18050/60

    FX markets

    Euro

    Still stuck in the mid 1.1100’s and not looking particularly likely to go anywhere else. Since breaking the upward trend back in early May the cross has stepped lower on a weekly basis and longs will be hoping that this trend does not continue. The shifts lower are weakening though so it is hard to be positively negative!

    Support is at 1.1110/20 then 1.1050/60 and 1.0990/00

    Resistance is 1.1195/05, 1.1320/30, 1.1460/70, 1.1590/00 then 1.1720/30


    Sterling

    After a series of polls indicating that the remain camp was finally in the ascendancy came another lot showing the exact opposite. As I have never in my life been rung up or stopped in the street to ask my opinion about elections/referendum etc I am beginning to wonder who it is that gets called up.

    So down the cross has come and we are back in our 1.41-1.46 range that we have talked about for so long now.

    Support is at 1.4460/70, 1.4320/30 and 1.4250/60

    Resistance 1.4560/70, 1.4745/55, 1.4810/20 1.4915/25


    Gold

    Gold has managed to rally from the recent lows as equity markets have slipped but the rally is still fragile. The recent fall out has managed to break the upward trend in place since January and we have not moved back above it yet.

    Clients remain very long and even though many must have been forced out of positions by the recent falls just as many have come in buying

    Support is at 1204/06 1196/98 and 1184/86

    Resistance is 1216/18, 1228/30 1240/42 and 1266/68

    Oil

    Well $50 proved just a bit too much for the time being and sellers have pushed us back to the 49 buck level.

    The flat lining growth in China, Asia in general and Europe is not conducive to a major price spike just yet so we are likely to struggle to make much headway above 50 bucks ust for the time being.

    Support is at 48.60/70, 47.40/50, 46.60/70 and 45.35/45,
    Resistance is at 50.70/80 and 52.05/15
     

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