18th April 2011

Equity Overview

It was a quiet week last week for Equities, with the market posting small losses. The market recovered from lows made early on Thursday afternoon and was mainly range bound over the week.

Thoughts from the trading floor

The market was predominantly range bound last week with little in the way of news providing any sentiment or direction. The S&P 500 future made a high on the week on Monday at 1330.25 before coming under some small selling pressure during the week. Lows were made on early on Thursday afternoon at 1298.25 before the market made a strong bounce going into the close. This low was just two full ticks through the low of 1300.25 made on March 29th and will provide short term support for the June contract. If this area holds the market will look to get back up towards the highs of 1336.50 but should we see a further break lower then the bears will target the 1280-84.50 area. How the market reacts around here will be key.

European equities were a similar picture with the German Dax future making two attempts to break lower on Tuesday and Thursday before bouncing off 7100-15. This will act as short term support before bigger levels at 7070-80 will come into play. The June contract has a daily trend line coming in from the high made on 7th April, currently at 7205. The market will need to get through here and break April’s highs of 7262 if it is to keep it’s bullish momentum.

On Monday morning we saw news break from a senior IMF source that Greece had asked for a change in the terms of its loans and restructuring some of it’s debt. This was soon denied by the country. There has been talk in the market of this happening for some time now but markets sold off initially on the news, with the Dax future dropping 60 points and the FTSE 100 future 40. The problems of the weaker Eurozone countries are still far from over and the markets are still prone to big moves off of this bad news, and provides the biggest danger to a continued recovery in the markets and the world economy as a whole.

Important events this week.

Tuesday: US Housing Starts
Wednesday: UK BOE Minutes released, US Existing Home Sales
Thursday: UK retail Sales, US Initial Claims and Philly Fed
Friday: World Market Holiday

Bull View

In the S&P 500 future, after failing to significantly break support at 1300.25 the bulls will target the top of last weeks range at 1330 before having another go at the highs of the year at 1336.50.

Bear View

The bears will look to take advantage of any further bad news coming out of the Eurozone economy and take the market back through short term support at 1300.25 (S&P 500) and 7110-15 (Dax). Breaks below here will pave the way for further selling.

Futex View

We are still bullish equities in general in the long term and expect the yearly highs to be tested and broken in the coming months. With volumes low and the Easter market holiday at the end of the week though, we expect the market to be relatively quiet and will look to trade the range of the S&P 500 between 1300 and 1320.

11th April 2011
Equity Overview

Focus on FTSE 100 Futures
Equities posted another week of gains last week as the recovery from the Japanese disaster stretched to it’s third week. The FTSE 100 Future is now trading within 60 ticks of the high’s made in February.

Thoughts from the trading floor
The FTSE June contract closed higher again on the week, closing just below the 6000 handle at 5997. It was a relatively quiet news week for the markets, with the main focus on Trichet’s ECB press conference and the eventual acceptance from Portugal to ask the EU for financial aid. The Portuguese news have very little effect on the markets, with many participants believing for some time now that this was an obvious outcome, despite claims to the contrary for many weeks from the country’s politicians. With Trichet producing little in the way of surprise in his press conference, the markets were mainly range bound for the week.

Technically the market remains bullish with the yearly highs of 6087 within 50 ticks of early morning highs on Monday. There is minor resistance at 6040-50 before we reach this highs but if both can be taken out, then the market will look to 6150 as a further target. There is cause for concern however in that the market has topped out in the 6015-25 range for three straight days without a further drive higher. If the market fails again here on Monday we may start to see some week longs flushed out and see some profit taking. Short term support lies at 5945 and then at 5918, but major support is seen at 5820-50. As long as the market can remain above these levels the bulls are in control.

UK CPI is out on Tuesday along with the German ZEW which may give the market some direction heading into US data out later in the week. We also have option expiries on Friday at 10:15am BST, and so we may some moves towards one of the bigger handles (6000, 6100) as we approach, with volatility expected in the final few minutes.

Important events this week.

● Tuesday: UK CPI, German ZEW
● Wednesday: EU Industrial Production, US retail Sales
● Thursday: US Initial Claims and PPI
● Friday: US CPI, New York Manufacturing, Industrial production and the Michigan Survey

Bull View
After another week of gains the bulls will look to push higher again and take out the years highs, paving way for moves to 6150 and beyond. They must keep the market above the 5820-50 range.

Bear View
Bears will look to defend the 6015-25 range that saw the market top three times last week and hope to take out week longs on prolonged selling should another failure at these levels occur. As previously mentioned, the 5820-50 should be the first target.

Futex View

We are still bullish equities in the long term and expect the highs of the FTSE to be tested and broken in the coming months. However, due to the range bound nature of last week we favour buying retracements down to 5950 and major support until we see the market make a meaningful move through the recent highs.

4th April 2011
Equity Index
Overview
Another strong week from equities last week with all the major indices closing markedly higher than where they opened. It was a quiet week for news until Friday’s jobs report and manufacturing data which both showed slight beats on analyst expectations.

Thoughts from the trading floor
The S&P pushed higher again on the week and closed just above resistance at 1327.00 having traded as high as 1333.75 in Friday’s session. The index still shows signs of impressive strength and the yearly highs are now firmly within sight at 1343.00. Short term support is seen at 1310-15.00. The Dax in Germany was again the strongest of the major indices, with Friday’s rampant day taking it through the 7200 handle. The Dax is trading close to short term resistance at 7220, but major levels are not seen until 7355. Major support is seen down at 7060. The FTSE 100 futures in the UK are now within 100 ticks of the yearly high but must first push through resistance seen at 6030-40.

The markets seem to have well and truly shrugged off the bad news from Japan and have taken little notice of the ongoing struggles of some of the smaller Eurozone economies as well as the conflicts in some middle eastern countries. Portugal have continued to claim an unwillingness to seek aid from the EU, but a bailout of some sort seems inevitable in the coming weeks. Should this happen, it will be interesting to see if the markets turn their focus to Spain.

There is little in the way of major economic releases this week, so markets will look to the FOMC minutes released on Tuesday, and the ECB interest rate announcement on Thursday. Traders will look to see whether Trichet and the council will press ahead with their intended rate hike and look for further signals of ECB thinking in the press conference that follows.

Important events this week.

● Monday: UK PMI Construction
● Tuesday: Eurozone Services PMI’s, US ISM-Non-Manufacturing, FOMC minutes from prior meeting.
● Wednesday: UK Industrial Production, German Factory Orders
● Thursday: US Initial Claims, UK/ECB/Japan Interest rate decisions
● Friday: US Wholesale Inventories

Bull View
After another strong week, the S&P 500 has little in the way before the yearly highs can be tested. With little data to be released and volumes low, the equities may continue their slow grind up.

Bear View
Bears will look to defend double tops on the year in both the Dow Jones Industrial Average and the S&P 500 and look for and signals from the Fed about future, sooner than expected rate increases.

Futex View

Again the markets showed strength and we favour a move to at least test the highs of the year in the S&P 500 and possibly even the FTSE 100. It will be interesting to see how the markets react from here and whether any high volume comes into the markets around these levels.

28st March 2011
Equity Index
Overview
Equities across the board last week posted strong gains and continued their recovery from the sharp losses seen in the aftermath of the Japanese Earthquake and Tsunami. Despite negative downgrades on some of the Euro zone’s sovereign ratings and mixed news from the week’s economic releases, markets on both side of the pond showed their strongest weekly gains in months.

Thoughts from the trading floor
Technically, the S&P 500 future continues to show bullish signs with a continuation of the bounce seen off the lows made at 1241.25 at the beginning of last week. The contract closed the week at 1310.00, breaking through resistance seen at 1304.00 and is now trading back above levels seen before the shock of events in Japan. This has left a significant swing low and further resistance will now be eyed at 1327.00 and furthermore, the 2011 highs of 1342.00. Short-term support is seen at 1280.00. The Dax future had a particularly strong bounce last week. After an impressive first hour on Monday the Dax retested the week’s opening lows on Wednesday but failed to break. This paved the way for further gains with the contract closing two previous daily gaps at 6872.5 and 6995.0. Although a strong bounce, the Dax is still some way short of the yearly highs at 7470.0 and resistance is eyed at 7050.0 and 7100-10.00. We would have to see a move below 6730.00 before the bears were back in control.

Although the charts have painted a strong picture this past week, negative news continues to provide the markets with reasons to be cautious. The markets have shrugged off the downgrades of both Spain and Portugal’s government bonds in the past couple of weeks, but after Portuguese politicians voted against the austerity measures proposed by the government, the country may finally have to seek a bailout from the EU.

Over the weekend there have been more violent clashes in the Middle East and further political unrest may cause traders to look to book profits on recent longs. The situation with Japan’s nuclear plants also remains a danger. While the markets have showed little worry recently over the situation, further radiation leaks must provide a cause for concern as we enter the third week since the Earthquake struck.

Important events this week

● Monday: Pending Home Sales
● Tuesday: UK GDP Final Q4, US Consumer Confidence
● Wednesday: ADP Jobs Report
● Thursday: US Chicago PMI, US Initial Claims, US Factory Orders
● Friday: US Non-Farm Payrolls, ISM Manufacturing

Bull View
After an impressive bounce following the Japanese Earthquake, the bulls are firmly back in control and will be confident of testing the 2011 highs of 1343.00 in the medium term.

Bear View
Bears will look for further negative news on the Eurozone economies as evidence of continued unsolved problems, along with clashes in the Middle East to try and regain some downward momentum that was reversed last week.

Futex View

We were bearish last week but despite a general negative news-driven week, the markets proved to be surprisingly resilient. Although in the longer term we expect the highs to be tested, we will look for some profit taking going into the month and quarter end, especially after the strong bounce witnessed in the last two weeks.

21^st March 2011

Equity Index

Overview

Last week equities stabilized after seeing sharp weakness on Tuesday and Wednesday. The German Dax Index, in particular, saw the heaviest losses when compared to equities on both sides of the pond.

Thoughts from the trading floor

From a technical perspective the S&P 500 future continues to look bullish in the short-term. The S&P future bounced rather smartly off the lows earlier last week at 1241.25 and is now trading around the 1289.00 handle this morning. A move through the 1298.00-1304.00 area would see the market regain a bullish chart posture, and mark the recent weakness down to 1241.25 as a significant swing low. This would then pave the way for a move back to the recent high prints for 2011 at 1342.50. For the Dax future there is a significant gap at 6872.5. If the market is to recover it must take this level out, otherwise it remains vulnerable to capitulations. If this level is taken, a further gain to the 6970.0-6996.0 area is favoured. The short-medium term outlook may be determined by price action around this level. This morning’s move higher needs the 6884.0 highs to remain intact. If this level is taken and the usual hourly close below here is achieved, we may see already nervous longs throw in the towel.

This week traders will continue to follow the developments from Japan. We have seen more positive headlines over the weekend that the nuclear plant issues have started to ease which has helped sentiment this morning. However, the issues remain an ongoing concern and any hint of a further deterioration in the status of the nuclear plants may result in market participants panicking out of recent longs.

Over the last week, we have seen a gradual escalation of social unrest in the Middle East. News that the UN will enforce a no-fly zone above Libya has helped energy markets recover from the panic liquidations seen last Tuesday. The situation in Bahrain and Saudi Arabia also remain a grave concern. This may prompt market participants to look to exit recent longs on rallies.

Important events this week

• Monday: US Existing Home Sales
• Tuesday: UK CPI, RPI.
• Wednesday: US New Home Sales.
• Thursday: US Durable Goods
• Friday: US GDP

Bull View

As long as the monetary stimulus is in place Bulls will remain confident of an ongoing medium-long term rally. Their next target in the S&P 500 is 1343.00.

Bear View

Bears will continue to look for further catalysts for a deeper correction and will be hoping the weakness of last week can follow through this week.

Futex View

We would back further weakness heading into the end of the month. The market has started to show signs of some short-term weakness and we would back further declines heading into quarter-end.

07^th March 2011

Equity Index

Overview

Last week equities were largely range-bound. The market had a sharp sell-off on the 1^st trading day of the month, which broke the sequence of bullish 1^st of the month buying. However, having then settled into a steady move higher over the course of Wednesday and Thursday, they came under pressure following the US employment report on Friday. This week sees very little economic data outside of the Bank of England monetary policy report. This should allow an easy development of market moves and give us a good indication for market themes going into the rest of the month.

Thoughts from the trading floor

From a technical perspective the S&P 500 future continues to look bullish in the short-term. Support at 1291.50-92.50 is important and as long as the market can hold above here, a challenge of resistance at 1343.00 (recent high prints) remains on the cards. The sell-off observed on Friday saw European equity futures markets test key support levels, 7125.5 on the Dax future and 2923 on the EuroStoxx future. The S&Ps remain firmer than their European counterparts with the market testing the 1311.00 support level on Friday’s move lower. In terms of near-term resistance, the S&P future is capped by the 1332.50-36.50 area, the Dax by the 7316.0 level and EuroStoxx is capped by resistance at the 3000 handle.

This week traders will continue to follow the political developments in the Middle East. Recent days have seen an escalation in violence in Libya which resulted in the Middle-Eastern indices suffering further losses. The overriding fear is that the unrest spreads to Saudi Arabia. In this scenario, equities would come under severe pressure whilst oil would spike significantly. In response, oil is trading at fresh highs not seen since the onset of the liquidation phase of the credit crunch. However, one must be wary of these moves as we have seen the USD continue to remain under pressure across the board in spite of the geopolitical tensions and thus it seems likely that there are larger forces at work in the commodity markets.

Friday’s US employment situation report was met with disappointment by the markets. Although the fear of escalating Middle-East tensions aided the move lower in equity indices, we saw the USD sink in response to the report. This may indicate the market’s intentions going forward as the broad trend of 2009-2010 with the USD lower resulting in higher commodity prices and equities may come back into vogue. The basis of this trend was largely on the back of market expectations that the Fed will keep monetary policy very loose.

Important events this week

• Thursday: BOE monetary policy announcement, US Jobless claims
• Friday: US Retail Sales Report.

Bull View

As long as the monetary stimulus is in place, Bulls will remain confident of an ongoing medium/long-term rally. Their next target in the S&P 500 is 1441.00.

Bear View

Bears will continue to look for further catalysts for a deeper correction and will be hoping weakness at the end of last week can follow through this week.

Futex View

We would back further weakness this week. The market has started to show signs of some short-term weakness and we would back further declines heading into the rest of the month.

28^th February 2011

Equity Indices

Overview

Last week equities traded sharply lower as they looked to correct after strong monthly gains over the course of this year. The S&P cash made lows below the key 1300.00 handle. The market retraced a good chunk of the week’s losses on Friday, a follow through from the bounce seen on Thursday evening.

Thoughts from the trading floor

From a technical perspective the S&P 500 future continues to look bullish in the short-term. Support at 1291.50-92.50 is important and as long as the market can hold above here, a challenge of resistance at 1343.00 (recent high prints) remains on the cards. The market found a floor late last week below the daily trend line, which is at 1301.00 today. The market was unable to force a daily close below here, which should aid the cause for the bulls. The 1320.00-1322.00 remains the major stumbling block, in the short-term, for bulls. Another key failure around this level may result in an extended sell-off targeting a break and close below the daily trend line and thus a deeper correction. A move back above here in the next day or two should then target the recent highs.

This week traders will continue to follow the political developments in the Middle East. Recent days have seen an escalation of violence in Bahrain and Libya, which resulted in the Middle-Eastern indices suffering further losses yesterday to fresh 9-month lows. The overriding fear is that the unrest spreads to Saudi Arabia. In this scenario, equities would come under severe pressure whilst oil would spike significantly. Currently, this remains a tail risk; howeve,r market investors hate political instability and further tensions will cause headwinds.

Tomorrow is an important day for the markets as Fed’s Ben Bernanke makes his key semi-annual speech. In this event, Bernanke will outline the Fed’s strategy going forward. As ever, the outlook for the economy and the FOMC’s policy towards their Q.E. package will be the highlight. We have started to see a raft of voices from the Fed suggesting that some members have started to turn hawkish. However, Bernanke has maintained that the Fed’s mandate towards employment will need to be fulfilled before they head towards a sustained exit strategy. Dovish comments may be taken as a green light to buy equities and other risk assets. Notably, the USD has continued to show weakness, and dovish comments may thus result in further selling of the USD and buying of risk assets. Alternatively, a hawkish speech may result in another round of panic liquidation of risk assets and thus force a deeper correction in equities heading into the Non-Farm payrolls report on Friday.

Important events this week.

• Monday: Chicago PMI report (US)
• Tuesday: ISM manufacturing report (US), Bernanke’s key monetary policy report.
• Wednesday: ADP employment report (US)
• Thursday: ECB monetary policy announcement.
• Friday: US Employment situation report.

Bull View

As long as the monetary stimulus is in place, Bulls will remain confident of an ongoing medium-long term rally. Their next target in the S&P 500 is 1441.00.

Bear View

Bears will continue to look for further catalysts for a deeper correction and will be hoping weakness last week can follow through this week.

Futex View

We would back further weakness this week. The market has started to show signs of some short-term weakness and we would back further declines heading into the rest of the week.

21^st February 2011

Equity Index

Overview

Last week equities performed well posting further gains as the S&P 500 Future claimed its highest close of the year at 1343.00. This week may start off slowly as Monday volumes will be lower as a result of a public holiday in the US. Despite this activity should pick up with traders particularly focused on US Consumer Confidence and Durable Goods numbers.

Thoughts from the trading floor

From a technical perspective the S&P 500 future continues to look bullish. Support at 1313.50 is important and as long as the market can hold above here a challenge of resistance at 1441.00 remains on the cards. The only stumbling block could be daily resistance at 1372.00.

This week traders will continue to follow the political developments in the Middle East. Recent days have seen an escalation in violence in Bahrain and Libya which resulted in the Dubai indices suffering its worst down day of the month on Sunday. The overriding fear is that the unrest spreads to Saudi Arabia, in this scenario equities would come under severe pressure whilst oil would spike significantly. Currently this remains a tail risk however market investors hate political instability and further tensions will cause headwinds.

Another potential headwind facing the equity bulls is the fear of sooner than previously anticipated rate hikes. Although for now US inflation appears to be relatively contained the same cannot be said for the UK. Last week the latest data showed that UK inflation was continuing to rise as the headline figure reached 4%. The increased speculation that the BOE will increase rates over the next two months gained extra credence as MPC member Sentence hinted that another one of his colleagues had joined him in calling for higher rates potentially taking the number of dissenters to three. We will find out whether this is the case on Wednesday when the latest BOE minutes are published. If the indeed there are further calls for rate hikes this could see equities come under pressure as a move is more aggressively priced in.

Important events this week.

• Tuesday: Consumer Confidence (US)
• Wednesday: BOE Minutes, Existing Home Sales (US)
• Thursday: Durable Goods Orders (US), New Home Sales (US)
• Friday: GDP (P) (UK)

Bull View

As long as the monetary stimulus is in place Bulls will remain confident of an ongoing rally. Their next target in the S&P 500 is 1141.00.

Bear View

Bears will continue to look for catalysts for a pullback and will be hoping weakness in this week’s releases can provide it. They will also be keeping a keen eye on developments in the Middle East; particularly regarding Saudi Arabia.

Futex View

It remains hard to fight the current uptrend so we remain on the sideline looking for an opportunity to enter from the short side.

14th February 2011
Equity Index
Overview
Last week equities performed well posting further gains as Mubarak’s resignation and reassurances of continued stimulus from Bernanke boosted confidence. This week is cluttered with economic releases including the latest retail sales number and inflation data from the US.
Thoughts from the trading floor

From a technical perspective the S&P 500 future continues to look bullish. Support at 1299.50 remains important and as long as the market can hold above here a challenge of resistance at 1441.00 remains on the cards. The only stumbling block could be daily resistance at 1372.00.

Last week, Portuguese 10 Yr Government Bond yields rose to their highest levels since the European sovereign debt crisis began. As the yields rose, European indices came under pressure particularly the IBEX 35 where losses were led by banks. However, these moves were short-lived as the ECB stepped into the market to purchase government bonds. This step almost immediately reversed all the moves and appeased any short-term tensions that had entered the market. Despite these interventions, this remains an unsustainable solution which will undoubtedly end in Portugal seeking an Irish-style bailout. This would immediately place a large drag on the Spanish index and provide substantial headwinds to the ongoing equity rally.

Last week, China hiked their base interest rate by 0.25% to 6.06% causing a quick money selloff in equity indices worldwide. This move retraced within a couple of hours and was soon forgotten. However, this is very unlikely to be the last rate hike from China this year as they try to prevent a hard landing from strong growth. This will concern equity bulls as a significant reason for the recent equity strength has been the resilient Chinese growth story. Signs that this may be slowing could provide a signal that Western stock indices may be reaching an interim high.

Important events this week.

• Tuesday: CPI (UK), ZEW Survey (Ger), Advance Retail Sales (US)
• Wednesday: FOMC Minutes
• Thursday: CPI (US), Phili Fed
• Friday: Retail Sales (UK)

Bull View
The bulls still remain in charge and will hope that inflation data remains low this week, encouraging ongoing Federal stimulus.
Bear View
Bears will continue to look for catalysts for a pullback and will be hoping weakness in this week’s releases can provide it.
Futex View

It remains hard to fight the current uptrend so we remain on the sideline looking for an opportunity to enter from the short side.

31^st January 2011

Equity Index

Overview

Last week equities again struggled as instability in Egypt and weak UK GDP scared investors. This week we see a packed release schedule with the latest ECB rate decision and US Jobs Report the most anticipated. In addition, the instability in Egypt will continue to affect market trading.

Thoughts from the trading floor

From a technical perspective the S&P 500 futures have struggled over the last couple of weeks, forming a daily double top around 1299.50. This will now prove an important resistance level over the next few weeks. A failure to break above here could quickly see the market descend to 1245.50, with further support at 1216.00.

Last Friday we saw a deterioration in the situation in Egypt as political instability led to a county-wide curfew in an attempt to curb protesting and rioting. This resulted in a worldwide fall in equity markets as investors fled to safe havens. The main fear is that the social tensions will overflow to neighboring Middle Eastern countries. This was highlighted in Dubai where the main index dropped 4.3%, its largest one day fall in eight months. There are also concerns that the troubles will lead to interruptions in shipping passing through the Suez Canal, a key trade link for Western Europe. Over the weekend there have been few positive developments so we expect the story to influence equity indices throughout the week. Simultaneous rallies in AAA government bonds and Oil prices will be a good indicator that not all is well.

This week traders will focus on two events. Firstly, the latest ECB statement in which we will find out if ECB president Jean-Claude Trichet will further underline the short term inflation fears he raised last month. Traders will also be listening out for an increase in the rate at which the ECB lends to banks after sources last week hinted that they were going to try and combat the problem of “addicted banks”. Secondly, the latest US Jobs report released on Friday will, as always, provide an opportunity for volatility and an insight into the strength of the US economy. If we see further weakness here, this may be a final nail in the coffin of the long lasting equity rally.

Important events this week

• Monday: Chicago PMI, Exxon earnings
• Tuesday: ISM Manufacturing (US)
• Wednesday: ADP Employment Change (US)
• Thursday: ISM Non-Manufacturing (US),  ECB Rate Announcement
• Friday: Change in Non-farm Payrolls (US)

Bull View

Bulls will be keen to regain the initiative. To do this their first goal will be to break above the double top formation at 1299.50. A swift resolution to the Egyptian situation, accompanied by a solid jobs report on Friday, could provide the catalyst for this move.

Bear View

Bears will hope that the recent weakness is the beginning of a correction which could yield a 10% drop from the high. As many indicators point towards the S&P 500 being overbought, they must be confident of continued weakness.

Futex View

We believe the world equity markets will be very volatile this week as traders try and digest a lot of information. Deterioration in the Egyptian situation could provide the catalyst for a sizable correction in equity prices.