Markets Look to Solidify Stance
Spread betting markets traded with what could be described as a good deal of indecision last week. At this stage, most of the policy stances and sentiment factors are “baked in the cake.” Most traders have a sense of what the major central banks are likely to do and are relatively confident in the broadly positive trajectory that stock markets have taken so far this year.
What is still missing from the equation are the actual data statistics to either confirm or deny these recent trends. We have already seen several pieces of evidence that support these beliefs in the underlying strength of the markets. Key examples here include drops in jobless claims and improving numbers in the manufacturing sector. This basically means that we are seeing the requisite gains in a number of different sectors. But since markets have started to show signs of stalling in recent sessions, it will be important to see if the larger pieces of economic data will agree with these latest stock movements.
Most of the focus next week will be placed on the US Non Farm Payrolls release, which will validate or invalidate the trends that have been popping up in the recent weekly releases for jobless claims. The consensus analyst estimate is calling for a small increase to 190K jobs, from the 175K that was posted last month. Even if we see a result that is in-line with expectations, expect to view this as a positive given the fact that this is a solid outcome in terms of historical averages.
The S&P 500 is looking weak on the shorter term charts. But when we pull out to the broader time horizons, we have yet to convincingly break support in the 1840 region and we did manage to close above that level for the Friday session. This means that the index is still a buy at current levels unless we see a weekly close sub-1840. First level of resistance to the topside can be found at 1890. Short term contrarian positions can be taken there to the sell side, with stops above 1900.
The FTSE 100 is starting to carve out a range on the daily charts. At the moment, we can see a sloppy double bottom in the 6360 region, and buy entries can be taken as long as this area holds within the range. To the topside, resistance comes in at approximately 6820. But in both cases it should be remembered that these are not clearly defined levels, so this makes it difficult to place exact stop losses when looking to enter into new positions in the FTSE.
The DAX has posted a strong recovery after making a false downside breakout in the 9000 region. Given the strength of the momentum, the bias is still to the topside, initial resistance comes in at 9730.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.