Quiet markets tend to rally

If we look at the performance in the major market indices over the past 3 weeks, we cannot help but be impressed.

The FTSE 100 has climbed 600 points or 12.5% and the Dow almost 1000 or 10% !

Even thought these gains are extremely impressive, they may well continue over the summer period as quiet equity markets tend to drift higher; maybe a generalisation but ProSpreads clients are on the same tack.

However beware; although the Greek crisis and the potential default of other PIIG nations seems a distant memory, the problem has not gone away, so the party may come to an end if or when another default occurs.

And the same goes for BP shares, which are obviously also well off their lows. The removal of their CEO Tony Hayward and realisation that BP is still a very good company are considered firm foundations for further recovery in the stock price, which will only aid the summer rally that is expected in the FTSE 100 index.

FTSE finds resistance

The FTSE 100 finds technical resistance between 5100 & 5130 (Sep future). If this holds the index might slip back towards the major psychological level of 5000. A healthy close above 5130 could continue the rally with new resistance at the 5180 level. Today’s move is likely to be pivotal !

FTSE bouncing strongly

Well; we definitely saw some direction in the afternoon yesterday, as expected, with the indices finding strength across the globe. Volume is fairly low, so caution should be taken today. The FTSE 100 has rallied over 150 points from yesterday’s lunchtime levels, so may pull back a little before heading higher again. Technical indicators suggest some support at 5000 (Sep future) with resistance sitting just below 5100.

Index Review

Well the FTSE stayed strong for most of yesterday, awaiting the return of the US markets after the their long weekend. The US opened strong also, but as the trading day evolved, sellers emerged driving the US & European Indices lower. The FTSE is currently trading around the area of resistance (now support) noted yesterday, so direction from here is key, in that it may set the tone for the rest of the month or even the rest of the summer. No major figures out today, so the European indices may well be taking their lead again from the US when the markets re open this afternoon.

Morning view

A healthy start to European Indices, which are trading back up to levels which were important support levels broken through last week (now resistance levels). Its not unusual to see markets retracing back to key break out levels; so the key is can these indices hold these higher levels when the US markets open after their long Independence Day weekend…
Broadly, technical resistance exists at the 4900 level in the FTSE 100 Index and 5900 level in the Dax Index. All eyes on the US markets this afternoon..

Quiet before the storm..

Markets very quiet today; partly because of the US holiday (Independence Day), and partly because we think summer has arrived, especially in the UK ! But the problems which ignited market volatility several weeks ago still exist, and are likely to rear their ugly heads again in the near future. So beware of these quiet markets, as they often precede large moves, creating great trading opportunities.