Stocks Rise on Earnings, Improving Data
Spread betting markets saw positive reversals when compared to the declines posted last week. Equity markets closed in the green, as encouraging earnings stories came from companies like Yahoo! (YHOO), Morgan Stanley (MS), and CitiGroup (CITI). This helped propel financials and create prospects for recovery in the troubled tech sector. But the market moves were broad based, and we saw entire stock benchmarks close higher on the week.
Examples here can be seen in the positive closing for the SPDR S&P 500 Trust ETF (SPY), and even the iShares MSCI Emerging Markets Indx ETF (EEM). This latter example is somewhat surprising, however, as there was some disappointing economic data out of China which has all but confirmed the growth slowdown that is currently being seen in the world’s second largest economy. For spread betting traders, this is an important development, given the fact that is is looking more and more clear that markets are going to work off of developed market data and shrug off what is happening in emerging economies.
Looking ahead next week, we can expect risk aversion to continue, and this will likely create continued pressure on both the US Dollar and in precious metals. This means more potential downside in assets like the PowerShares DB US Dollar Index Bullish ETF (UUP) and in the SPDR Gold Trust ETF (GLD) and iShares Silver Trust ETF (SLV) for those that are focused more on commodities.
The S&P 500 is starting to bounce after breaking some important short term support levels last week. But with these latest moves, support is now seen at 1820 and the overall bias remains cautiously bias as long as this level holds. At the moment, technical analysts are targeting another test of the all time highs just below 1900 but it is unlikely that we will see an extension this large before the end of next week.
The FTSE 100 is having trouble gaining any real traction and prices are now back to trading at the lower end of the recent range. Short term, major support is now seen at 6500 and if we do see a bearish break here, expect to see a quick drop back into longer support at 6430. Contrarian traders can take new buy positions in this area but stops should be kept relatively tight as there is declining reason to believe that we will see sustainable rallies before the end of the month.
The DAX is showing some strong downside momentum, and this makes long positions risky until we start to see better evidence of long term stabilization. Strong support starts to emerge just ahead of 8900, and good value for range trades can be found in long positions that are taken in that region. Topside, major resistance can be found at 9700, and these two price zones will likely define the trading range for the next few months.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.