Sentiment turns again, only four more days !

Discussion in 'Market Commentary' started by SimonDenham, Jun 20, 2016.

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  1. SimonDenham

    SimonDenham Simon Denham CEO Mercor Index Staff Member

    What a difference a day makes, twenty four little hours.

    Two polls have come out suggesting that Remain has regained the lead and the markets have taken this as, almost, a fait accompli.

    I am not quite so sure that things are done and dusted as I still struggle to find anyone above the age of 30 who is going to vote to stay. Even the two doctors who came to dinner over the weekend were going to vote for exit. I worry that people are telling the pollsters that they will vote for Remain because there is a certain nastiness about wanting to exit as the Remain camp has portrayed Exiters as racists, bigots etc. As with the last election my personal belief is that people do not want to admit to intending to vote Tory as this is perceived as selfish.

    It is very sad to suggest that it might have taken the murder of Ms Cox to focus minds on what is also important here. Are we part of a union for the general good or …. are we not.

    Commenting on Markets today is pretty academic as the entire focus of investors’ minds is on Thursday. Dealers will (no doubt) be in and out on a regular basis. Trying to take pips here and there but it would be a foolish speculator who went into the close on Thursday with anything other than a flat book or at most a small interest either way.

    Economic Data

    Friday saw US numbers come in as expected with housing starts and permits pretty much inline with forecasts.

    Today we have little to guide us and what little we have has already come out! Germany’s May producer prices were slightly firmer at 0.4% MoM and now merely 27% down on the year. This is much in line with the slow improvement in EU numbers over the last few months.

    The problem with this statement is the word ‘slow’. The improvements in outlook in the EU are so imperceptible that the great majority of the population will be entirely unaware of them. In general there is, as with the UK, an undercurrent of dissatisfaction with the way that the European Economy is going. The rise of the easy answer political extremes seems assured for the time being.

    Indices

    FTSE

    Having flirted with the 5900 level through much of last week today is seeing a big rise as Brexit fears abate somewhat. There is a lot of blue sky above us as, we may have forgotten, the highs of last year were above 7000. The collapse in the Oil price and drops in commodities obviously account for much of the weakness but one might expect that the this would positively impact consumers of such products. So far this has not happened as other factors have come to the fore (China, Fed intentions, Greece, Brexit etc) But one might expect that at some point the planets will align ather more favourably.

    Support is at 6110/20, 5940/50 then 5900/10 and 5815/25

    Resistance is at 6220/30 and 6340/50

    DAX

    Friday’s comment “The Dax is over 250 points above the lows of yesterday as I write and the shorts are now the ones under pressure. Dealers seem to be sniffing blood and funds which had set up short protection or bear option strategies will now be worried about missing out on a buying opportunity.” For 250 now read 500 points and one assumes that any speculative shorts have now been well and truly shot down.

    Curiously enough, since the first few minutes on the open the Dax has been quite stable far less volatile than in some previous sessions.

    As mentioned before the leap in joyous abandon seems a bit premature given that the Brexit vote is still to come and there is many a slip betwixt cup and lip.

    Support is at 9800/10, 9710/20 and 9605/15

    Resistance is 9940/50, 10130/40 and 10280/90

    Dow

    Ditto for the Dow. Up 160 points and looking comfortable for the time being.

    Support is at 17670/80, 17600/10 then 17520/30
    Resistance is at 17845/55, 17995/05, 18050/60, 18215/25

    FX markets

    Euro

    The Euro has responded with other the equity markets to the more hopeful view of the Brexit vote and our clients are picking up light positions.

    The cross is at 1.1340 and has bounced in line with everything else. Markets are being anything but rational at the moment but the Euro seems, at least, to be less headless chicken that the other markets.

    Support is at 1.1275/85, 1.1180/90 and 1.1110/20 then 1.1050/60
    Resistance is 1.1370/80, 1.1460/70, 1.1590/00 then 1.1720/30


    Sterling

    Stirling has made it back above 1.4600 and having made it to the bottom of our frequently stated Brexit range (1.41-1.46) we are now back up at the top.

    It is difficult to see us going much higher as even when the vote was much more solidly in favour of Remain we did not get much above here (1.47 odd being the top of the range)

    Support is at 1.4560/70, 1.4320/30 and 1.4250/60

    Resistance 1.4655/60 1.4725/30, 1.4810/20

    Gold

    Bouncing around like a Yo Yo but even the big rally in equity markets has not impacted the bull too much. Yes, we are down 10 bucks on Friday’s close but we are still up at 1288 as I write.

    Gold seems to be the only market that is acting rationally in the current scenario as bonds rally and equities oscillate you would expect Gold to prosper.

    Support is at 1270/75, 1252/54, 1240/42 1228/30 1216/18, 1204/06

    Resistance is 1294/96 and 1303/05 then 1315/17

    Oil

    Brexit events even impact oil and now we are back up at 50 bucks (having hit 47 on Thursday we have seen little other than buying since.

    Clients seem in two minds about the black stuff with long dominating for quite some time before sellers came in above the 50 dollar mark. We are seeing a slight tendency towards longs still (55% long strategies) but are seeing more sellers than buyers this morning.

    Support is at 47.40/50, 46.60/70 and 45.35/45,
    Resistance is at 50.50/60, 51.70/80 and 52.05/15
     

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