Stock Market Update 2 September 2011

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Financial Spreads: Spread Betting and CFD Trading

Online Index Spread Betting: 2 September 2011

Judging by the way September has started few would have thought that August could have been the month that it was.

The stock market indices seem to have steadied themselves so far this week but that doesn't mean the volatility is over.

Already this morning there's a little bit of nervousness ahead of today's Non Farm Payroll data and we could see some fireworks depending on how far from estimates the number comes out as.

Expectations are for around 90,000 new jobs to have been created. However, judging by how August played out and the damage it caused to consumer confidence, there could well be a number much lower than this, particularly since August is a quiet month for hiring anyway.

At the moment neither the bond or equity markets are pricing in a double dip recession, but they have certainly indicated that the likelihood is higher.

This morning the FTSE 100 is suffering from weakness in the Dow Jones last night and the danger for the bulls now is that the 5400 level is rejected again, just as it was a couple of weeks ago.

With the FTSE 100 back in the mid 5300s, 5355 at the time of writing, this is a little higher than where we were calling it in the early hours. The markets have recovered well from their lows, but the concern is that the up days have seen little in the way of volume leading to some to believe that there simply aren't many bulls out there.

To the downside near-term support is seen at 5280/50 and to the upside resistance is seen at 5415/55/85.

Online Index Spread Betting: 1 September 2011

September is under way and seems to be commencing placidly.

Historically, September has been a mixed month for the FTSE 100 with the bias to the downside. The number of months showing a loss is just ahead of the number posting a gain and when there have been declines they've been pretty spectacular on average.

Another interesting fact about this month is that it is the second most volatile, after October, when measured by size of trading range.

So if history is anything to go by, this month is unlikely to see a let up in the volatility, something that our spread betting account holders are probably praying will actually fall.

August was a brutal month in terms of trading conditions and it would be an understatement to say clients found it a hard environment to trade in.

At least this week the FTSE 100 just seems to have found a firmer footing, taking it back towards the 5400 level only days after it looked like sub 5000 levels would be on the cards for some time.

A close above 5400 will be good for the bulls from a technical analysis standpoint, as this is where the market failed and dipped a last time, so this resistance level should become support going forward.

This morning the FTSE 100 is at 5380 at the time of writing and the highlight of the day for the UK market will be the PMI manufacturing data.

Online Index Spread Betting: 31 August 2011

So as August draws to a close few will look back on it fondly but many will remember it for a plethora of bad news and social unrest.

This month is set to have the third biggest trading range for the UK 100 on record which indicates just how volatile things have been.

Last night's FOMC minutes did little to offer more than what the Federal Reserve's Chairman said last week at Jackson Hole. As a result, investors are now looking to the next FOMC meeting which is in the latter half of September.

Despite all the doom and gloom the FTSE 100 is holding up well and has already made an attempt at getting over the 5300 level.

The indices spread betting markets have had a massive shake out and corrected to the downside due to the revisions downwards to global growth. However at the moment any bad economic data seems to be followed by equity market strength.

This indicates that investors are pinning their hopes on another bout of QE from the Fed, which in turn is boosting gold prices.

At the time of writing the FTSE 100 is at 5295, having achieved a close above last week's high which is quite encouraging for the bulls in the short term. Their next targets will be 5360 and 5390 which might even suggest the rout is over if we close above the higher target.

On the economic data front today we see the Non Farm Payrolls prelude in the form of ADP employment data. It's hard to see the number coming in as high as the expected 100k due to the terrible data that's been released recently so do not be surprised if things come in worse than 100k. On the other hand, as mentioned, this might even cause markets to rally.

Online Index Spread Betting: 30 August 2011

A degree of normality seems to be creeping back into the market as Greece's stock market posted its biggest one day gain yesterday since the 1980s.

Even though the market likes what they see in the merger of two of Greece's troubled banks, no one seems to have learnt anything from the UK when Lloyds was forced to take over HBOS.

It is likely that this deal is going to do exactly the same, whereby a bigger bank will be created with the same problems.

We will have to wait and see but for now London is catching up with other European bourses as it was closed for its August Bank Holiday yesterday. As a result, a triple digit gain is greeting investors as they return from the extended weekend.

This August has been a month many will wish to forget which started turbulently as the US couldn't agree on their debt ceiling and subsequently received a credit downgrade.

Since then the spreads markets have continued in that vein of form with wild swings between highs and lows. There were riots across the UK, a continuing inability for European leaders to come to agreement on how to deal with the Eurozone crisis and seemingly constant downgrades to global GDP forecasts. As a result we're about to record the most volatile month of August for the FTSE 100 on record.

In fact, things are unlikely to get any better from a volatility standpoint. The financial spread betting markets just seem to be settling themselves but events to come could lead to further big moves in either direction.

Germany's Angela Merkel faces crucial votes of confidence, Italy has to get some 10 year bonds away and that's just in Europe. In the US, Non Farm Payrolls are on Friday and the market is still waiting in hope for Ben Bernanke to open the door to further stimulus, which may come at some point in September.

Economic data is thin on the ground this morning but later we have consumer confidence from the US.

This is a very important release due to the US economy's huge reliance on its consumers which is expected to decline along with almost everything else at the moment.

The University of Michigan numbers have been plummeting, so today's number is due to fall from 59.5 to 52.2 and, when you've had stock market indices dropping so fiercely, there's little to feel confident about.

We also get FOMC minutes released after the FTSE 100's close and when they last met we were told that they will keep their interest rates low into the middle of 2013. However, the devil will be in the detail as investors will wish to see what the major concerns are surrounding the recent downturn in economic indicators.

Online Index Spread Betting: 26 August 2011

Not a great start to the day, especially after the Far East did it's best to take us higher after the weakness for American shares.

Yesterday was also a real disappointment to the longs after the early moves had seemed so confident.

Today sees the UK GDP number out at 09:30 and it is difficult to make much of a statement before this hits the wires. We are expecting a 'very modest' growth number but there is fear that even this might be too much.

If we get something along the lines of the German disappointment last week then things could get a little nasty. Of course in line with all comments, these things do cut both ways. With the market expecting to be disenchanted, virtually any number may be taken well along the lines of 'it could have been worse'.

No matter how we look at things, confidence is extremely fragile with the DAX 30 recording its second 'flash crash' in two weeks.

Last week it was a fat finger error with some poor dealer rumoured to have accidentally sold 1600 DAX contracts 'at market' instead of leaving an order to sell at a particular price.

And yesterday we had a twin hit, with first 'a rumour' that Germany was about to be downgraded and second that the German regulators were going to extend the shorting ban.

The DAX fell 200 points in a flash and in truth, while it bounced back 150 points, it seems to be struggling to recover any confidence.

No matter what happens this morning the markets will be awaiting the pearls of wisdom from Mr Bernanke this afternoon, expected to speak from 15:00 London Time. Do not look for too much before then.

The FTSE 100 is now back at 5090 having revisited yesterday's lows of around 5080 a few times already. We can see support is building here but 5100/05 and 5140/45 are holding us back on resistance.

Above here dealers would be looking for 5185/95, the level that was proving a barrier earlier in the week. On the support side below 5080 there is resistance to falling all the way down to 5065 but then we would be going for the obvious target of 5000.

Online Index Spread Betting: 24 August 2011

The FTSE 100 is well off the highs of last night but still up on the close yesterday with our current quote at around 5140/41.

Sellers seem to creep out of the woodwork above 5185/90 but CFD account holders are still, in the main, looking to bottom pick on any further falls. This is obviously a dangerous game but seems to have served relatively well over the last few sessions. There is particular interest at anything approaching the 5100 mark and lower.

Resistance for the FTSE 100 is at 5175/80 and 5210/15 with support at 5100/10 and 5080/85.

The DAX is continuing to be particularly explosive with hundred point ranges seemly two a penny; we have already had one since the 08:00 open.

There is reasonable resistance at 5625/35 and 5680/90 but it is fair to say that with such violent activity no levels can be considered particularly solid. Support is at 5495/5505 and 5430/40.

The US equities markets rallied on the hopes for Bernanke to 'do something' later in the week but this seems to have played out to a certain extent this morning.

Whilst confidence is an import factor in market direction, clients should beware a classic case of buying the rumour selling the fact. If Bernanke fails to impress we could be in for another wild ride.

Online Index Spread Betting: 23 August 2011

The mood of cautious optimism appears to still be with us after yesterday's turn-around in fortune for the shares spread betting markets.

The FTSE 100 index market is trading up 1.5% this morning with attention turning to the US and Jackson Hole in particular.

There seems to be some hope of a repeat of Ben Bernanke's quantitative easing announcement last year. QE2 sparked a rally that continued well into the first half of this year and the bulls will be hoping for a repeat performance.

QE3 may not be so easy this time around, given the political turmoil due to the proximity of next year's election and the growing dissention among the FOMC members.

The FTSE 100 market seems to be trying to build a base around the psychological 5000 level, with the S&P 500 holding 1,100 support for the time being.

Online Index Spread Betting: 22 August 2011

Markets are opening slightly lower as Merkel holds firm in not committing Germany to picking up the 'tab' for every country in Europe.

She is well aware that she would never be able to force such a commitment through the electorate. However, even if another party were to win at the next election, we all know that some form of compromise must be forthcoming.

But aside from the problems with the sovereign debt in Southern Europe it must be admitted that everyone does seem to have gotten very pessimistic over what are merely poor numbers rather than actually critical. Although this ignores the alarming Philly Fed figures on Thursday, which we will need confirmation of.

CFD trading investors seem to be as likely to take the recent weakness as a buying opportunity as look at all the negativity swirling around and take an outright bear position.

As mentioned several times over the years, I am a general believer that governments serve their people best when they do absolutely nothing.

I always thought that John Major was one of the most misunderstood premiers in that he managed to never make a drama out of a crisis. Indeed his tenure covered the golden period from 1992 to 1997 and set up the conditions for 'Our Tony' to reap all the benefit over the next 13 years.

Merkel is probably correct in sitting back to await events as Italian 10 year debt is now back below 5%, by quite some way. As this was the trigger point for all the equity market weakness it might seem that traders have taken their eyes off one ball to concentrate on another.

The FTSE 100 has already had a 100 point range this morning after it tried to open down at 4960 only for traders to take one quick look and ask "why are we down here?"

We are seeing buying on almost all fronts from gold to crude oil and back to equities and stock market indices. The lows on Friday proved too much for us to challenge in early action and it is beginning to look as though the mid 4900's are a dangerous place to be a bear.

Looking at the spread betting charts there is strong support from 4935 to 4960 which it is difficult to see us challenging today as there are no major economic indicators out of either Europe or the US.

While we might not be expecting a relief rally there is probably no real bad news out there to really do too much damage. As usual this assumes that the US does not come in on a negative frame of mind.

Underlying everything it is still true to say that companies have seldom been in such a strong position both from a current revenue position and from a cash on account perspective.

Resistance for the FTSE 100 is at 5085/95 and then 5125/30 but real bulls might be looking for an attack on the falls of Thursday.

The DAX index is probably not in such a sanguine position as the FTSE 100, given the GDP data out last week, but even here we are struggling to find any sellers. With Merkel's refusal to join a bailout of the South, the immediate prospect of a multi-year drag on margins seems less likely and so we may see a bit of a base building exercise in the short term.

By Simon Denham, 2 September 2011

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