Daily Financial Analysis / Simon Denham / 26 March 2009 / Leave a comment

Daily Comment Thursday 26th March

There's no question that there are certainly bulls around at the moment and a willingness to buy stock when the market retrace at the moment. Another sharp recovery on Wall Street in the very last hour of trading (100 points in the last 15 minutes!) has lead to a positive start for European indices this morning, albeit a small one. The test for the FTSE now is 4000 which has only been flirted with so far this week. On Tuesday morning our quote rose above 4000 but the underlying cash index is yet to trade there and whilst it's only 100 points away at the time of writing, it seems quite a long way off as the momentum in this recent move up just seems to have fizzled out.

Ahead of the G20 meeting in London next week there maybe some short covering of any long positions recently picked up from the lows as news of attacks on bankers and plans to bring the City to a grinding halt hit the headlines. On top of this the UK's most recent gilts auction was very poorly received by the bond market and Mervyn King announced the UK's bankrupt! It's enough for anyone who's bullish of equities to take a moment to pause for thought.

Bankers have had a tough time of it and whilst it's understandable the anger felt by the wider public (myself included), we ourselves also have to accept the part we've played to fuel the financial meltdown. Having been addicted to credit for well over a decade now and borrowing and spending beyond our means the blame for the consumer credit bubble falls firmly on our laps.

Onto the markets and as mentioned the FTSE is not very directional at the moment. Clients remain confident that the rally will continue having dipped into the fall last night and holding long positions. The last week or so has been very profitable for clients who have ridden the move higher and popping champagne corks along the way, but just for now we're at or near the 20% rise from the 12 year lows set earlier this month, which is what we've seen the markets doing repeatedly in the last six months. Banks and miners are helping to prop up the market at the moment but UK retail sales have just disappointed to the downside. The retail sector is very interesting at the moment with some stars and some dogs. Whilst the supermarkets benefit from increased sales and footfall other high street retailers are fighting hard for customers after the big Christmas and New Year discounts. Having cleared most of their stock back then for huge discounts the consumers have pretty much got what they need to last them the rest of 2009 such as a television, dishwasher or wardrobe of new clothes. It'll be a tough few months ahead for the high street and if the weather is anything like it was during the last two summers, we could see more casualties.

Currency markets have also been rather subdued of late but the overall trend remains dollar negative. Just when throughout George Bush's time in office he kept on playing the dollar up and it weakened to record lows, Obama is the reverse telling the world how the dollar remains the one and only safe haven store of value - could this be famous last words? Certain the recent moves suggest that investors are doubtful that the dollar can hold onto the gains it made throughout January and February.

The GDP data will be eagerly watched as it is released at 12h30 today and there could be a pleasant surprise to the upside following on from the much better than expected durable goods data yesterday.

Gold continues to hold above the major trend line support currently at $935 but a break below $920 could open the way for a test of major support around $900 to $890.