|
|
Risk markets were lower on the day, albeit closing off their worst levels respectively. European peripheral equities felt the most weight as we saw peripheral debt yields move higher on the day. The Euro currency was lower on the day but also off its worst levels. German bunds closed firm on the day in sympathy. Today is the last day of the month, but also is the start of a busy week in terms of economic data. This month’s rally in risk can be made or broken on how this week goes and thus should be important.
|
|
|
|
|
|
Market Analysis 30th January 2012:
|
|
|
|
|
Euro-Bund Futures (FGBL) Open:139.25 Low:139.11 High:139.77 Close:139.55
|
|
|
|
|
|
|
|
|
|
|
The Bund closed higher on the day, taking out the 139.50 handle on the way. The 139.24-36 area should be first support today and whilst the market is above here, a test of the all time futures highs remains likely. If the market gives below this support area it may show that the run higher over the last week was corrective and a sharp sell-off is then likely.
|
|
|
Support
138.44-54 **
137.86-94 **
2.00% ***
137.12-18 ***
136.60-69 ***
|
|
|
|
Resistance
1.636% ****
140.50 **
140.23 ***
140.01 **
139.77 **
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FTSE 100 Index Futures Open:5727.0 Low:5682.0 High:5752.0 Close:5693.5
|
|
|
|
|
|
|
|
|
|
|
The FTSE closed down on the day, taking out the 5675.5-82.0 level at the open and also the 5650.0 handle. Although eventually held around the 5605.0 level. A move through here should lead to a broader retreat to the 5539-59.5 area, where bulls may have to make their last stand. Currently, the market still remains bullish and this sell-off can be seen as corrective as long at the market remains above these important support area. A move back above the 5675-82.0 area should imply that the market is set to resume its upward run.
|
|
|
Support
5631 *
5605-09.5 **
5539-59.5 **
5442-54.5 **
5281-89 **
|
|
|
|
Resistance
6095 ***
6049 ***
5913-31 **
5878 ***
5763-66.5 **
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EURO STOXX 50 Index Futures (FESX) Open:2424 Low:2397 High:2426 Close:2413
|
|
|
|
|
|
|
|
|
|
|
The EuroStoxx was down on the day. The market gapped lower, below Friday’s lows at the open and eventually traded down to the 2400 handle, holding last week’s 2397 lows. The market recovered to 2413 by the close although remains below the gap, which is bearish despite the double bottom at 2397. As long as the market remains below the 2428-30 level, it is likely that 2397 will give and the market will have an extended correction. A move back through 2430 should provide stabilisation and a resumption to the month’s up trend.
|
|
|
Support
2397-02 **
2368-75 ***
2266-72 **
2225-42 **
2162-75 **
|
|
|
|
Resistance
2560 **
2531-42 **
2503 ***
2466-70 **
2446-50 **
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DAX Futures (FDAX) Open: 6492.0 Low:6416.0 High:6496.0 Close:6478.0
|
|
|
|
|
|
|
|
|
|
|
The Dax scraped a close below the 6480.0 level, having rebounded from lows made at 6416.0. The market recovered from weakness during the am session to close around here. Resistance around 6480.0-96.5 caps the market and an early move through here should see a broad resumption of the trend higher. A move below the 6416.0 lows may result in an extended push lower to the 6264.5 level.
|
|
|
Support
6416 **
6338-55.5 **
6264.5 ***
6067-10.5 **
5976-16.5 **
|
|
|
|
Resistance
6972.5 **
6860.0 **
6797.5-02.5 **
6750.5 **
6579.0 **
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
| Economic Calender
|
|
|
|
|
|
|
|
|
| | Time (GMT) | Country | Data | Month
| Expected | Previous | 10.00 | EZ | Unemployment Rate | DEC | 10.4% | 10.3% | | 14.00 | US | S&P CS 20 City M/M | NOV | -0.50% | -0.62% | | 14.00 | US | S&P CS Composite-20 Y/Y | NOV | -3.26% | -3.40% | | 14.45 | US | Chicago PMI | JAN | 63.0 | 62.2 | | 15.00 | US | Consumer Confidence | JAN | 68.0 | 64.5 |
|
|
|
|
|
|
|
| |
| | |
|
| |
| US Chicago Purchasing Managers Index |
|
|
|
|
|
|
|
|
| There are many economic indicators released during the calendar month that give the markets an insight into the performance of different US regions, with a particular focus on the manufacturing sector. Over the course of the month we witness releases covering Philadelphia, New York, Kansas City and Richmond amongst others. Whilst all of these reports compete for the attention of our traders, it is the Chicago PMI that tends to have the biggest impact upon the financial markets. The simple reason for this is that the Chicago report is released on the last day of the month, the day before the closely watched ISM Manufacturing Survey. This timeliness, together with the report’s strong correlation with the ISM Manufacturing Survey, lends Chicago PMI some much needed credibility. The report is compiled from questionnaires completed by around 200 purchasing managers within the Chicago area. The headline number is a diffusion index which is a weighted average of five sub-indices: new orders, production, order backlogs, employment and supplier deliveries. With 50 marking the mid-point, readings above this are considered reflective of expansion and below this contraction. Also released is measure of prices paid which is of key interest to our fixed income traders. |
|
|
|
| | | | |
|
|
Technical
Analysis - Gaps
|
|
|
Keen observers of price behaviour have no doubt discovered that from time to time, gaps appear in the normal price sequencing. These can usually be seen clearest on a technical chart.
|
|
|
|
|
|
|
|
|
Gaps are areas on a chart where the price of a financial instrument has moved either up or down with no trading in between. As a result of this, the chart shows a "gap" in price. Gaps most often appear between the close of a market and the next session’s open. However, they can also – albeit less frequently - appear intra-day. Gaps can occur as a result of a variety of technical and fundamental reasons. For example, a gap on a Daily chart may be seen if a company announces strong earnings after the market close and its stock then gaps up on the open of the next day. An intra-day gap may appear when, for example, the bid/ask spread widens and market participants may need to pay up or down to enter or exit the market causing price to "jump" from the last traded price to the next that the trader can get filled at. This can often be seen around the release of key market news.
Some quick research on gaps shows that there are several different types of gap including breakaway gaps, exhaustion gaps and common gaps. Each one is said to signify a different outcome for price. Today we are focusing on gaps in the FX markets which are, more often than not, common gaps. In Foreign Exchange markets - which trade 24 hours a day, five days a week - you tend to see gaps occur most regularly on the Sunday open when New Zealand enters the markets first. In actual fact, gaps in Foreign Exchange are relatively common - over the last 18 months there has been a gap in the EUR/USD spot price approximately 65% of the time on the Sunday open. It is these daily gaps that we pay most attention to. One reason that gaps are of interest to traders is because of their tendency to fill. That is to say that price will often trade counter to the direction it gapped in and return to the price at which it last closed on the time frame you see the gap occur. In fact, again, over the last 18 months in the EUR/USD 98% of the gaps recorded have filled at some point. This statistic however, masks the fact that traders can suffer unsustainable draw downs when trying to execute gap-fill type trades on this basis.
However, armed with these statistics, we can get a clear idea that a gap is a “potential setup” that a trader can exploit for profit. One way that these gaps can be traded is by waiting for the market to open and then to see if there is any follow-through in the direction that the market gapped in. If the follow-through is insignificant, we can fade the gap - take a position against the direction the price gapped in - by entering at the first significant support or resistance level that the price reaches and hold the position until the price reaches the Sunday close and the gap technically "fills".
So, gaps are another example of price behaviour that the astute trader should be aware of. A gap can provide a frame of reference for the trader and those who aspire to be profitable will look at what happens after price creates one in order to spot potential patterns that they can profit from. By back testing the phenomenon, traders will likely be able to work out consistent, controlled ways to exploit these for profit.
|
|
|
