Stock Markets Mostly Unchanged in Pre-Holiday Trading
Spread betting markets saw reduced volatility in last week’s trading, with many of the major global stock benchmarks closing relatively unchanged for the week. This is not altogether surprising, given the fact that we are entering into not only a holiday period, but the end of the year as well. As a result, many traders are “packing up ship” closing out positions, and taking profits before the end of the year. From a price perspective, this is also relatively unsurprising given the fact that traders are being given an opportunity to pad their monthly earnings results with stock market valuations at elevated levels.
But what is most interesting about last week trading performances is the fact that a relatively unchanged result is still the worst outcome for the S&P 500 since August. This is important because it should give traders an indication that markets are currently in a significant bull run that might be running out of steam — at least in the short term. For these reasons, it is unlikely we will see any major upside pushes in the most closely watched global stock benchmarks in the next few weeks. Volatility is likely to continue slowing as investors square positions.
But this does not mean that it is impossible to find profitable spread betting positions. If anything, this environment favors short-term bears that are willing to take positions relatively quickly and keep stops tight. Look for range trading positions to dominate as we move into next week but remain watchful for any central bank commentary statements that could jolt the market.
The S&P 500 has broken short term support in the 1780 region, and this creates a moderately bearish bias when looking at the smaller time frames. The next level of support to watch can be found at 1752, so we are unlikely to see sustainable bounces until these lower demand levels are tested. Total price momentum has slowed significantly in the last two weeks, so breakout traders will likely need to find new strategies in the current climate.
Last week, the FTSE 100 broke through important psychological support (referenced last week) in the 6500 region. As expected, prices showed continued losses and the eventual bear target is now seen at 6330. It is unlikely we will see this level tested next week, but the downside trajectory was confirmed with last week’s bearish break and it is not likely we will see resistance levels broken in the coming week. Sell a retest of 6500, as this area now marks support turned resistance.
The DAX gave back some of its recent gains last week, with prices briefly falling through critical psychological levels at 9000. Since we did not see a significant bounce from this region, the bias is now bearish with the main advice to sell at range tops rather than buying into range bottoms.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.