Flatten positions and go down the pub.

Discussion in 'Market Commentary' started by SimonDenham, Jun 23, 2016.

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  1. SimonDenham

    SimonDenham Simon Denham CEO Mercor Index Staff Member

    So today’s the day.

    The FTSE is now almost at a high point for the year only the one week period around the end of April has been higher which gives a better indication of expectations that anything I can write.

    As mentioned yesterday the markets seem to be absolutely convinced that the vote will be for Remain. This is odd as the polls are pretty much neck and neck and the simple fact is that, historically, the older you are the more likely you are to vote AND the older the voter is the more likely they are to vote out. So a neck and neck poll would appear to favour the exit side.

    There seems to be a belief that, no matter what people say, once they are actually standing in the booth they will tick the Remain box but this argument works both ways in that the Exit camp has been portrayed by many in the Remain camp as racist/bigoted/stupid etc so the actual polls to date might be affected by this. No one wants to appear mean, stupid or horrible in a survey so there is a chance that many of the responses that went for Remain may actually favour Exit.

    Anyway, all speculation will be ending now as Britain votes on where it wants to be.

    It is all good fun!

    Economic Data

    Yesterday saw a few minor US which saw a minor slow down in house price inflation (although still well above inflation) and actual home sales were marginally stronger than expected.

    Today we have a load of Markit PMI numbers from France and Germany these numbers have a mid point of 50 (below 50 means less confidence and above 50 more).

    France’s PMI numbers are forecast to be slipping back below the parity mark as the consequences of the latest disruption over Monsewer Hollandaise Sauce’s minor changes to employment laws cause disruption across the country. Expectations are for the Composite number to be at 49.0 from 50.9

    In Germany we are looking to see numbers remain solidly positive at 54.4 for the composite number.

    This afternoon we have a slew of minor US numbers which are all expected to be slightly down on last month’s data but still positive.

    New Home Sales are looking to fall to 560,000 from 620,000 but this is a measurable number and is more to do with a fall from a suspiciously high April number. Although even this number is merely a shadow of previous times. 500k would have been considered depths of recession in the past.

    Indices

    FTSE


    When I started to write this missive the FTSE was being called up at 6330 but now as I pen this bit of the daily comment we have slipped back to 6300 as, presumably, a bit of caution enters traders minds but in truth by the time this actually gets posted we could be anywhere.

    I will say the same comment on all markets today. Unless you can really afford the risk it is not sensible to have a speculative position after about 3pm London Time.

    Support is at 6280/90, 6220/30, 6110/20, 5940/50

    Resistance is at 6340/50, 6420/30 and 6470/80

    DAX

    As with the FTSE the Dax is probing the recent highs today but I can imagine that there will be a bit of position lightening through the session. Longs will have been very happy to ride the move higher, shorts will have been slaughtered, but there is always the chance that the bookies are wrong so…. why take the risk?

    Support is at 9940/50, 9800/10, 9710/20 and 9605/15

    Resistance is 10160/70 and 10280/90

    Dow

    As mentioned yesterday

    “The Dow is back up at the pre sell off levels having, sensibly, not really joined in with the global panic over the UK vote. Historically we can look back at the Dow chart and not even really notice the minor drop and recovery… a bigger move occurred only the month before.”

    It would appear that the Yanks are the only sensible people out there. No matter how the vote today goes the world will find an accommodation to the new reality. The idea that the UK will be shut out of markets is just not a realistic outlook. Too many companies in Europe rely on exporting to the UK to make some sort of Trade war any kind of reality.

    Support is at 17670/80, 17600/10 then 17520/30
    Resistance is at 17865/75, 17995/05, 18050/60, 18215/25

    FX markets

    Euro

    As mentioned yesterday the Euro is in a slow bull market going back to February and in the absence of any other news the trend always appears to be marginally up. This said there is not much to go for ust at the moment and we are likely to see a small reaction to the UK vote even here as an exit would probably be seen as slightly negative.

    Support is at 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

    My comment yesterday that it was difficult to see the currency rallying much beyond 1.4700 was obviously totally ignored by the markets and we are now up at the 1.4800 level this morning. Pre the Brexit fall we were happily trading around 1.53/1.55 so we might expect a stay vote to push us back up to here. This though is unlikely as there are probably not that many shorts out there to force a move higher.

    Support is at 1.4655/60, 1.4560/70, 1.4320/30 and 1.4250/60

    Resistance 1.4830/40, 1.4935/45 and 1.5020/30

    Gold

    Gold is trading the 1260/1270 region again this morning as it did in early May and March. The metal looks quite comfortable at these levels and it is unlikely that any major move is in the offing today….. tomorrow is another story

    Support is at 1260/62, 1252/54, 1240/42 1228/30 1216/18

    Resistance is 1286/88, 1294/96 and 1303/05 then 1315/17

    Oil

    Weak longs were pushed out yesterday with Brent falling to close to 49 dollars before rebounding back above 49.80 toward the close. This morning we are a little higher in very directionless trading as with all other markets eyes will be focussed on the UK this evening for any indications that the country is likely to vote to leave. Although it is hard to see how this would affect oil all that much.

    Support is at 49.10/20, 47.40/50, 46.60/70 and 45.35/45,
    Resistance is at 51.70/80 and 52.05/15
     
    Last edited: Jun 23, 2016

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