European Stocks Still Under Pressure
Spread betting markets have been caught in a seemingly endless loop of positive headlines when we look at the financial news media as it relates to equities and the most commonly traded benchmark indices. The S&P 500 is making new record highs along with the Dow Jones Industrial averages, so many spread betting traders have been lulled into what could be described as a false sense of security.
The SPDR S&P 500 Trust ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA) have seen limited declines even though we are headed into the summer trading session (remember the old adage: Sell in May, and go away). To be sure, this is an encouraging trend and it does bode well for those that are still bullish on stocks even at these upper valuations. But it should be remembered that the global economy is still a relatively fractured landscape, and there are some specific reasons to be concerned about the Eurozone and the central stock benchmarks that define the majority of its trading.
The latest news has centered on Spain, as eroding investor confidence is putting pressure on bonds and making it difficult for the Eurozone to move beyond the sovereign debt stories that have been seen over the last few years. Expect continued attention here to weigh on the Euro, the DAX, and the assets of peripheral countries (for example, the British Pound). This could be what drives sentiment for most of the trading week ahead.
The S&P 500 is still moving ahead on its bullish path to at least test the psychological 2000 mark. An event like this could have a significant impact on a large variety of asset classes, as it would surely capture the attention of almost all the global financial news media. We are easily within striking distance of this level and spread betting traders should be looking to buy dips in assets related to the S&P 500. First support comes in at 1940, short term traders can buy in here if given the chance.
The FTSE 100 is once again showing signs of potential failure as the British benchmark is now rolling over after hitting resistance at the 6880 area. This is significant because this area is now a triple top and we are going to start seeing more traders get bearish if the 6900 mark cannot be breached. Keep stops tight if trading into this area of technical resistance.
The DAX is still holding at relatively elevated levels and the current price activity can be viewed as a consolidation pattern before taking another run higher. It is no coincidence that most of the stalling it happening around the 10,000 mark but a weekly close above this area would clearly signal that a bullish summer lies ahead for the DAX index.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.