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Market Bulletin 30th September 2010

FTSE’s resilient hesitation encourages


further optimism
The Technical Trader’s view:
FTSE 100 Index LIFFE Continuous 7200
7100
7000
WEEKLY CHART
6900
6800
6700
6600
The market has been driven up
6500
6400
6300
from the lows by a completed
6200
6100
6000
Head and Shoulders Reversal
5900
5800
5700
pattern.
5600
5500
5400
5300
5200
5100
The minimum target move ( to
38.2%
5000
4900 5644) was achieved - and then
4800
4700
4600
the market fell back.
4500
4400
4300
4200 But only to find support at the
4100
4000 38.2% retracement around 4900.
3900
3800

3700

3600 Look closer at the bounce from


3500

3400
that level.
3300

Apr May Jun Jul Aug Sep Nov Dec 2008 Mar Apr May Jun Jul Aug Sep Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Nov Dec 2010 Mar Apr May Jun Jul Aug Sep Nov Dec

But note too, the importance of


the current market level – it is a
potential additional Neckline of a
bull Head and Shoulders pattern.
If overcome (the neckline level is
5662) the market will receive a
large additional stimulus…

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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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FTSE 100 Index Dec 10 5800


High 5720
5750

5700 DAILY CHART


5650
5616.50
5600

approximate level of the weekly cont. chart neck 5550

5500
The day chart is interesting.
5450

5400

61.8%
5363.50 High
5350
Note the tight consolidation of
5300

5250 the past few weeks.


5200

5150

5100

5050
And the support from the rising
5000

4950
diagonal from Prior Highs.
4900

4850

4800 Attempts by the bears to break


4750

4700
that diagonal support have –so
250000

200000
far- repeatedly failed.
150000

100000

22 29 6 12 19 26 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11
50000
It’s tempting to look for a
April May June July August September October
structure within the congestion
– but there isn’t one.

Yet, on balance, we favour a


test of the possible Neckline
and the Prior High at 5720.

We are short-term bulls. And if


5720 can be taken out, another
medium-term bull leg is in
prospect.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
in association with

The Macro Trader’s view:


Impending spending cuts and VAT increases scheduled for the start of 2011 may at best
depress growth for a couple of quarters and at worst risk a double dip recession. Despite this
the FTSE is only around 200 points off its 2010 highs.

Not a bad recovery from the lows hit in early July when the market gave up almost 1000 points
on a range of anxieties.

The main factors weighing on the market then were:


- The weakening US economic recovery, and
- The Euro zone Sovereign debt crisis.

In truth, neither has been dealt with.

The US economy continues to show signs of weakening causing policy makers and
administration officials alike to lose sleep. They ponder how best to re-invigorate the economy.

As for the Euro zone debt crisis, all seemed calm during the summer. But now there are
renewed fears about Ireland as the Anglo Irish Bank is in need of rescue. The sum involved is
put at one year of Ireland’s tax revenue - an expensive bail out. But the cost of failure would be
much greater.

So why then are stocks looking so bullish and in particular the FTSE?

As ever, markets and economies are closely linked. In the US the Fed has let it be known that
it stands ready to buy Treasuries if the recovery weakens any further in QE2.

In the UK, the Bank of England’s recent MPC minutes have alluded to a similar course. Policy
makers are moving towards a position where they might need to re-activate their own QE
program as they now judge downside risks to growth greater than upside risks to inflation due
to the impending fiscal tightening.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
in association with

While one could easily take the view that the economies of the US and UK are in bad shape if
both Central Banks need to restart the printing presses, the equity markets take the news
positively, since a fresh injection of Central Bank reserves should help spur economic growth.

Moreover there is always the possibility that here in the UK the Bank might opt to skip buying
gilts and buy corporate bonds instead, in an effort to get the cash out to main street, thereby by
passing the Banks that politicians still accuse of hording cash.

In any event, it is the promise that the US and UK could reactivate their QE programs that is
largely behind the current bullishness of stocks including the FTSE.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.