Labor Markets Next Obstacle For Stocks
Spread betting markets continue to see positive activity in stock prices, as the central benchmarks trade near long term highs and there is relatively little that seems able to derail the bullish optimism for equities.For the most part, these positive runs higher in stocks (in almost all areas of the world) have been supported by improved macro economic data and in corporate earnings as well.
We are starting to see consumer lending numbers improve on the global level as well, so there is little reason to believe that we will start to see any surprise sell-offs any time soon. To be sure, some spread betting traders have started to play against these bullish trends and actively take sell positions. There is nothing wrong with this, since prices are ripe for selling.
But it is important to remember that these types of positions should be viewed as more short term in nature and stock benchmarks like the S&P 500 and the DAX still have room to make additional moves in the upward direction. Volatility will almost certainly increase into the latter portion of the week, as US labor market data will be released in the form of the monthly Non Farm Payrolls report. Expect range trading conditions to dominate until we have clear confirmation of the number. This should change on Friday, however, so spread betting traders will need to alter strategies at that stage.
The S&P 500 is looking like it might start to flatten out in the region of its all time highs. There are a few different ways to determine this type of activity. We can either say momentum is stalling and ready for a downturn or we can say that prices are consolidating before another run higher. Both arguments are valid, although the bullish scenario carries more weight given the strength of the longer term bull trend. In any case, it makes sense to wait for some significant moves before making any trading decisions, as this would create better price opportunities.
The FTSE 100 is still looking like the weak point of the bunch, as the index cannot seem to hold onto gains as well as the S&P 500. On the bright side, these declines are opening up some better entry points for those that are looking to get long again. Significant support is seen near the 6700 mark, and traders can get long here with tight stops.
The DAX took a big turn lower last week, after flirting again with the much coveted 10,000 mark. This should be viewed as short term activity, however, and we are still in store for a test of the 10,000 mark. Look to buy dips from here if given the opportunity. Important support below rests in the 9600 area.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.