Daily Financial Analysis / Simon Denham / 18 June 2009 / Leave a comment

Daily Comment Thursday 18th June

The morning comment is starting to get a bit dull as markets trade and retrade the same old ranges. There is only a certain number of times that you can point this out before readers start to mutter "put another record on, please!"

Nice to see the Chancellor say, with one hand, that the banks must come under ever more stringent capital requirement and regulatory supervision whilst with the other berating them for not lending more money to aid growth. I have to suppose that either his powers of intellect do not actually reach to understand the underlying absurdity of his statements or that he is still trying to shift the blame of the UK's fiscal problems onto the financial sector. Mervyn King's speech managed to get about as far as he is ever likely to go in rebuking the government's spending policies. His references to the budget deficit underline the fact that it is not the Banks that hold the key to the long term prosperity of Britain it is the Governments stomach for making unpopular decisions.

The FTSE has made a brave attempt to break out below 4300 and is, indeed just below this level as I write, but even though the support range of 4280 to 4300 was actually breached yesterday there was absolutely no follow through at all and we remain in a sort of limbo of fear versus opportunity. The close last night should have brought out the technical traders in early activity this morning but the temptation to see this as a buying level is very strong. It would not be surprising to see a steady stream of small scale buying edging us back above the support line to recover the promised land of the 4300 to 4500 trading range.

The Dow, Gold, Oil and S&P are bouncing from last night's close and while the FTSE is struggling to follow suit it is one thing to suggest a lagging or muted reaction to events elsewhere and quite another to speculate on the UK index actually falling while others rally.

The lack of market direction is actually quite endemic at the moment and punters are concentrating on trading ranges rather than fundementals. Pitching any reasons (no matter how intellectually thought out) for either buying or selling in the current environment is very difficult as the data flow coming from both corporate RNSs and state bureau is very indeterminate. We all hope that the flattening out of bad news is a precursor to a reversal into growth but unfortunately we all fear that this is not the case.

A classic situation occurred in Cable (GBP/USD) yesterday. My comment in the morning about the excitement in the currency due to it being just about the only volatile instrument around at the moment was borne out by a fall of over 2 cents in morning trade followed by an equally strong rally in the evening. The net effect at the close of business was a change of just 6 pips after a trading rang of 260. Enough fun for anyone.

Today in almost a carbon copy of yesterday's early action has already seen an attempt to the down side and up side already in a 120 point range but to no very good conclusion as we sit at 1.6420 a few pips above the close last night.

Oil also matched the indecision with probes to the plus and negative side of the gain line with no very determinate conclusion. As mentioned in previous comment there seems to be a resistance to much of a move above $72 but equally certainly there is little appetite to risk selling it lower. With Iran a problem in the minds of forward planners, those who must secure delivery for future requirements against current liabilities (airlines, haulage etc), the temptation to avoid the risk of a sharp spike higher is hard to argue against. There is room for a move towards the 66 dollar level without threatening the trend higher and there is a definite support at 68.50 building up so there are targets for the bears but, for the bulls, there is still the very strong attraction of the 75 to 76 buck region which is both the OPEC target and the old support/resistance from 2007.