Stocks Higher As Macro Data Supports
Spread betting markets continue with the positive trading directionality as prices in the SPDR S&P 500 Trust ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA) continue to trade within striking distance of their all time highs. There was a good deal of attention that was given to stocks after the Dow Jones Industrials topped the 17,000 mark, and all of that focus is now being directed at the S&P 500 now that we are trading so close to the 2,000 mark.
It almost appears as though stock traders are going to be able to overcome this mark based on bullish sentiment alone, given the fact that we are consistently moving higher even with no major earnings impetus to send prices toward those closely watched levels. Additionally, stocks are now caught up in the summer doldrum period as they normally would be during this portion of the year, so these moves higher now are telling.
On the positive side, we have seen some relatively encouraging macro data that has helped create a better base for trading sentiment. Employment numbers in the US are now at their highest levels in six years, and prospects for developed markets have improved now that Chinese GDP numbers have suprised to the topside at 7.5%. The data calendar is going to start to pick up in the next few weeks, so spread betting traders are likely to encounter some enhanced volatility levels. This means positions should be kept somewhat smaller until the dust settles and price activity returns to normal.
The S&P 500 is still marching higher for what appears to be the imminent test of 2,000. This area translates to 200 in the stock ETF, so traders will need to monitor activity in both of these assets in order to use it as a precursor for what is likely to happen elsewhere. Aggressive short term traders might want to use the 2000 as an opportunity to take sell positions but if this is done, stops need to be kept very tight because any moves through there should be explosive.
The FTSE 100 is trying to regain some footing after failure at the technical resistance line of the daily descending triangle. Support currently rests in the 6650 area so CFD traders can take cautions long positions as long as we do not see any sustained breaks here. Most of the trends in stocks are still bullish, so its just a matter of time before the FTSE joins the party.
The DAX is looking like the most troublesome trade in the major stock benchmarks after what could be described as a false break at the 10,000 mark. Longer term, the trend is still up, however, so these types of dips are the ones that should be used to establish new buy positions.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.