Stocks End Volatile Week of Trading
Spread betting markets received the expected injection of price volatility last week, as a series of events jarred market expectations and sent investors buying and selling at different points during the week. Stock markets briefly surged to new all-time highs toward the middle and end of the week but most of these gains were given back as geopolitical tensions failed to fade from the headlines.
Most of the optimism was centered on the labor markets. Early positive indicators were seen when the ADP employment report (which measures monthly hiring in the private sector) came in well above market expectations at 220,000 new jobs for the month. The ADP report in itself has only limited influence on the broader economic trajectory. But the fact remains that the report is closely watched in terms of its implications for the much more critical Non Farm Payrolls number that is always released on the following Friday.
These correlations held up this week, as the NFP number inspired markets with a 288,000 print and this was the real driver in sending the S&P 500 to new all time highs. Unfortunately, political tensions between Russia and the Ukraine continue and this has kept investors on the sidelines when they would otherwise be entering into much larger positions. These issues should persist well into next week.
The S&P 500 had a volatile week but closed in a region that was very close to its Monday open. From a pattern perspective, the index should look highly vulnerable to some, as any real failures here could create what would be a head and shoulders pattern on the longer term charts. This is a bearish formation but it would be invalidated if we were to see a break of resistance at the 1895 level.
As expected, the FTSE 100 has rebounded sharply from the 6500 psychological support level. The bias here is clearly bullish as prices have made a clear break above the 6700 level. Upside could be limited, however, as we would need to see an upside break of 6880 before we can expect a true resumption of the uptrend. Because of this, bearish traders can wait for an approach to 6880 before looking to establish short positions. Stops should be kept relatively tight, though, because an upside break would be a very bullish event.
The DAX is starting to look like one of the best of the major benchmarks for new sell positions. We are starting to see a very clearly defined downtrend line on the shorter term charts and prices have now reached this trend line resistance level. In order to reverse this bias, we would need to see an upside break of the double top near the 9700 level. If this were to occur, the upside move would likely be forceful. But the bias is bearish until this happens, so look to establish sells at current levels.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.