Accendo Markets Weekly Roundup: 28 Jun 2013 - 6000 Bounce; Fed Member Bingo; No Medal for Gold; NFP Pause

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After several weeks of declines the UK index has registered some welcome progress, finding support just above the round number 6000 and posting a 4.5% rally to test the trendline of falling highs since end-May. Uncertainty may still be rife regarding the future of the US Federal Reserve’s QE3 programme. However, Bernanke had his committee members out in force (it was Fed-member bingo yesterday) putting markets at ease, with much emphasis on over-reaction and mis-interpretation of recent comments with “might, could, if, only and when” the words to focus on. Any change to QE3 is data dependent. US data sure to remain closely watched, but in my view bad data should help – QE3 for longer; good data supports Fed recovery optimism and in-line data is somewhere in the middle.

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While the bounce was nice to see gains have been capped by a 1-month trendline of falling highs at 6270 which, until decisively breached, could mean the rally is nothing but a correction within the downtrend – a trend isn’t over until it’s over; even a dead cat can bounce. So we could well go back to re-test 6000 and possibly even further if macro fears intensify again. On the other hand, the bulls will be hoping the 6215-6275 range of the last 24 hours is merely a pause after the 4.5% advance. After all, you can only eat so much, and as experienced end-May after a 5-week 10% rally to the top of the market and 12.5yr highs, we could really do without another bout of painful indigestion.

We are also at the end of a week, month, quarter and half. So here may be an element of window dressing and holding off until next week which sees what is likely the most important piece of US data to affect both sentiment on QE3 as well as Fed policy – US Non-Farm Payrolls and Unemployment. As always the devil will be in the detail with a 175K headline beat last month offset by downward revisions to the prior two months. We are still a way off the 200K needed. Anything close to that would be QE3 negative, but recovery positive. How markets react depends on how hooked they still are on central bank stimulus (a lot it would seem) or confident they are in macro data suggesting economic recovery.

Gold was much talked about still suffering from the prospect of QE3 ending sooner than expected and the USD strengthening to make it more expensive for non-USD investors. Add to this less fear of inflation needing a hedge, liquidation of holdings given the continued fall from 2012 all-time highs of $1800, ease of speculation of further declines, faith in central bank intervention negating safehaven interest and no yield then there’s not a lot going for the yellow metal. After pausing at $1300 last week, the second leg of the decline from $1400 was delivered for a test of $1180 – not far from the $1150 level we had identified as support (2008-12 Fibonacci + trendline).

Before I sign off, a quick word on our report this week (Back to the Future) focusing on the FTSE 100’s not insignificant 1750pt/30% round trip since the beginning of the year – 6000 to 6875 and all the way back again –  on fears of no more QE3 and money market stress in China. Several big names posted strong gains of 15-30% to end-May before falling all the way back to square one. Could there be recovery candidates which suffered unfairly during the correction? Could there be stocks which held up too well and could be due a correction? Worth a read before you position yourself.

As always, enjoy your weekend. I’ll off until mid-July for some much-needed R&R. I trust the markets will keep things interesting for you all.

For any commentary/analyst opinion on anything CFD/Spread Bet/financial markets-related, please contact research@accendomarkets.com

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Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including "2012 Winner of Best Execution only CFD provider" at City of London Wealth Management awards. Accendo Markets Ltd. is authorised and regulated by the Financial Services Authority (FSA). Register now for your FREE trading Guide Risk warning CFD trading, spread betting and Forex trading can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. Authorised and regulated by the Financial Services Authority.
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